Assessing the Impact of Variation Orders on Public Building Projects in Addis Ababa-By Andualem

ADDIS ABABA UNIVERSITY ADDIS ABABA INSTITUTE OF TECHNOLOGY S C H O O L O F G R A D U A T E S T U D I E S

ASSESSING THE IMPACT OF VARIATION ORDERS

ON PUBLIC BUILDING PROJECTS IN ADDIS ABABA

BY

ANDUALEM ENDRIS YADETA

A Thesis Submitted to the School of Graduate Studies of

Addis Ababa University, Addis Ababa Institute of Technology in partial

fulfillment of the requirements for the Degree of

Master of Science in Civil Engineering

(Construction Technology and Management)

OCTOBER 2014

Assessing the Impact of Variation Orders on Public Building Projects in Addis Ababa: M.Sc Thesis

Addis Ababa University ii Addis Ababa Institute of Technology


Addis Ababa University iii Addis Ababa Institute of Technology

DECLARATION

“I declare that this research report entitled “Assessing the Impact of

Variation Orders on Public Building Projects in Addis Ababa” is the result

of my own work, it contains no materials previously published or written by

another person except where due reference is made. This report has not been

previously submitted for any degree at other higher education institutions.”

Signature: :

Name of candidate: Andualem Endris Yadeta

Date : 03/11/2014


Addis Ababa University iv Addis Ababa Institute of Technology

DEDICATION

I dedicate this work for my teachers who nurtured me in my school life.


Addis Ababa University v Addis Ababa Institute of Technology

ACKNOWLEDGEMENTS

First of all may thankful honor return to God who sustained me during my research project! I

accomplished everything through Him who strengthens me.

I would like to convey my truthful gratitude to my Advisor Associate Professor Wubishet

Jekale Mengesha (Dr.-Ing) for his invaluable guidance and motivation throughout this

research. I am truly lucky to have him as my advisor and I thank him for inspiring me on my

research I had never dreamt of which afterwards became part of my life.

I acknowledge Addis Ababa Institute of Technology, all Civil and Environmental

Engineering department staffs that have been always supportive for the success of my

research project from the start to the final submission.

Many thanks go to Addis Ababa Housing Development and Construction Bureau for all

Government Construction Agency staffs especially to Ato Dereje Megersa, Ato Adhanom

G/Tsadik and Ms Hirut Ayalew for their support throughout my journey giving me all

supportive documents for my research without saving their golden time. I would also like to

thank all organizations and individuals who contributed directly or indirectly by providing the

necessary materials and support for realization of this research.

I am grateful to my employer, Madawalabu University for the support by way of a study

scholarship. I would like to express my gratitude to my colleagues and friends who

contributed to and supported my research project.

Finally, my parents have always been a real support to achieve my educational goals. I would

like to express my deepest gratitude to them for all their patience, love and support.


Addis Ababa University vi Addis Ababa Institute of Technology

TABLE OF CONTENTS

Content Page

DECLARATION ................................................................................................................ iii DEDICATION ................................................................................................................... iv ACKNOWLEDGEMENTS ................................................................................................ v LIST OF TABLES ........................................................................................................... viii LIST OF FIGURES ........................................................................................................... ix ABSTRACT........................................................................................................................ xi

1. INTRODUCTION ........................................................................................................... 1 1.1 Background of the Study ......................................................................................... 1 1.2 Statement of the Problem ........................................................................................ 2 1.3 Aim and Objectives of the Study ............................................................................. 3 1.4 Scope of the Study .................................................................................................. 3 1.5 Significance of the Study ........................................................................................ 4 1.6 Structure of the Research ........................................................................................ 4

2. LITERATURE REVIEW ............................................................................................... 6 2.1 Introduction ............................................................................................................ 6 2.2 Definition of Variation ............................................................................................ 6 2.3 Nature and Types of Variation Orders ..................................................................... 8

2.3.1 Nature of Variation Orders ............................................................................... 8 2.3.2 Types of Variation Orders .............................................................................. 10

2.4 Contractual Provisions Relative to Variation Orders .............................................. 11 2.4.1 General Conditions of Contract for Procurement of Works (PPA, 2006) ........ 11 2.4.2 Standard Condition of Contract for Civil Works Project (MUDC, 1994) ........ 13 2.4.3 General Conditions of Contract for Civil Works (UNDP, 2000) ..................... 13 2.4.4 Conditions of Contract for Construction (FIDIC, 1999) .................................. 14

2.5 Variation Orders and Project Delivery Systems ..................................................... 16 2.5.1 Design-Bid-Build (DBB) ............................................................................... 17 2.5.2 Design-Build (DB) ......................................................................................... 17 2.5.3 Integrated Project Delivery (IPD) ................................................................... 18

2.6 Management of Variation Orders .......................................................................... 19 2.6.1 Start Up ......................................................................................................... 20 2.6.2 Identify and Evaluate ..................................................................................... 20 2.6.3 Approval ........................................................................................................ 20 2.6.4 Implement and Review .................................................................................. 20

2.7 Causes of Variation Orders ................................................................................... 22 2.8 Impact of Variation Orders on Building Projects ................................................... 25 2.9 Recommended Strategies to Minimize Variation Orders ....................................... 30 2.10 Variable Identification .......................................................................................... 32


Addis Ababa University vii Addis Ababa Institute of Technology

3. RESEARCH METHODOLOGY ................................................................................. 35 3.1 Introduction .......................................................................................................... 35 3.2 The Study Approach ............................................................................................. 35 3.3 Population and Sampling....................................................................................... 36 3.4 Data Collection ..................................................................................................... 36

3.4.1 Desk Study .................................................................................................... 36 3.4.2 Survey ........................................................................................................... 36

3.4.2.1 Interviews .............................................................................................. 36 3.4.2.2 Questionnaire ......................................................................................... 36

3.5 Method of Data Analysis ....................................................................................... 38

4. DATA ANALYSIS AND DISCUSSION....................................................................... 40 4.1 Introduction .......................................................................................................... 40 4.2 Analysis of Data from the Desk Study ................................................................... 40

4.2.1 Project A ........................................................................................................ 41 4.2.2 Project B ........................................................................................................ 41 4.2.3 Project C ........................................................................................................ 41 4.2.4 Project D ........................................................................................................ 41 4.2.5 Project E ........................................................................................................ 42 4.2.6 Findings from the Desk Study ........................................................................ 43

4.3 Interviews ............................................................................................................. 44 4.3.1 Analysis of Data from the Interview ............................................................... 44 4.3.2 Findings from the Interview ........................................................................... 46

4.4 Analysis of Data from the Questionnaires ............................................................. 46 4.4.1 Rate of Response ........................................................................................... 46 4.4.2 Respondents’ Background .............................................................................. 47 4.4.3 Respondents’ Experience ............................................................................... 48 4.4.4 Findings from the Questionnaires ................................................................... 48

4.5 Discussion of Findings .......................................................................................... 63 4.5.1 Causes of Variation Orders in Public Building Projects .................................. 63 4.5.2 Impact of Variation Orders on Public Building Projects ................................. 64 4.5.3 Recommended Strategies to Minimize Variation Orders ................................ 65

5. CONCLUSION AND RECOMMENDATIONS .......................................................... 67 5.1 Conclusion ............................................................................................................ 67

5.1.1 Causes of variation orders on public building projects in Addis Ababa ........... 67 5.2.2 Impact of variation orders on public building projects in Addis Ababa ........... 68 5.3.3 Recommended strategies to minimize variation orders ................................... 69

5.2 Recommendations ................................................................................................. 70

REFERENCES .................................................................................................................. 71 APPENDICES ................................................................................................................... 77


Addis Ababa University viii Addis Ababa Institute of Technology

LIST OF TABLES

Table Page

Table 2.1 Types of variation ................................................................................................ 10

Table 2.2 Causes of variation orders .................................................................................... 23

Table 2.3 Impacts of variation orders ................................................................................. 26

Table 4.1 List of selected building projects.......................................................................... 40

Table 4.2 Summary of causes and impact of variation orders data from the desk study ....... 43

Table 4.3 Causes of variation orders from the desk study .................................................... 43

Table 4.4 Impacts of variation from the desk study .............................................................. 44

Table 4.5 Interview results .................................................................................................. 44

Table 4.6 Questionnaire return rate...................................................................................... 46

Table 4.7 Respondents’ experience ..................................................................................... 47

Table 4.8 Frequency of causes of variation orders from the clients group ............................ 49

Table 4.9 Frequency of causes of variation orders from the consultants group ..................... 50

Table 4.10 Frequency of causes of variation orders from the contractors group ................... 51

Table 4.11 Summary of correlation test on the ranking of causes of variation orders ........... 52

Table 4.12 Overall frequency of causes of variation orders .................................................. 53

Table 4.13 Frequency of impact of variation orders from the clients group .......................... 54

Table 4.14 Frequency of impact of variation orders from the consultants group................... 55

Table 4.15 Frequency of impact of variation orders from the contractors group ................... 56

Table 4.16 Summary of correlation test on the ranking of impact of variation orders ........... 56

Table 4.17 Overall frequency of impact of variation orders ................................................. 57

Table 4.18 Frequency of recommended strategies from the clients group ............................ 58

Table 4.19 Frequency of recommended strategies from the consultants group ..................... 59

Table 4.20 Frequency of recommended strategies from the contractors group ..................... 60

Table 4.21 Summary of correlation test on the ranking of recommended strategies ............. 60

Table 4.22 Overall frequency of recommended strategies .................................................... 61


Addis Ababa University ix Addis Ababa Institute of Technology

LIST OF FIGURES

Figure Page

Figure 1.1 Structure of the Research ...................................................................................... 5

Figure 2.1 Variation management process ........................................................................... 21

Figure 3.1 Five ordinal measures of agreement by Likert Scale ........................................... 37

Figure 4.1 Position of respondents ....................................................................................... 47


Addis Ababa University x Addis Ababa Institute of Technology

LIST OF ABBREVIATIONS

AAHDCB Addis Ababa Housing Development and Construction Bureau

BoQ Bill of Quantities

CII Construction Industry Institute

DB Design-Build

DBB Design-Bid-Build

FIDIC Federation Internationale des Ingenieurs-Conseils: a French acronym

interpreted in English as International Federation of Consulting Engineers

IPD Integrated Project Delivery

JBCC The Joint Building Contracts Committee

MUDC Ministry of Urban Development and Construction

PPA Public Procurement Agency

UNDP United Nations Development Program


Addis Ababa University xi Addis Ababa Institute of Technology

ABSTRACT

Variation is inevitable in construction projects due to the complex nature of the construction

industry. It is common in all types of construction projects and it determines the time limits

and anticipated budget of the projects. Variation order is observed as one of the most

frequently occurring issues in construction projects in Ethiopia. Like other regions of the

country, construction projects in Addis Ababa are suffering from variation orders. These

variations are known to impact various aspects of the projects. This study assessed the impact

of variation orders on public building projects in Addis Ababa to reduce them. The

objectives of the study were firstly to determine the causes of variation orders; secondly to

identify the impacts of variation orders; and lastly to recommend strategies to minimize

variation orders. Through a comprehensive study of literature review, resulted in

identification of 38 common causes of variation orders, 15 impacts of variation orders and 15

recommended strategies to minimize variation orders and these variables were mapped in

frequency table. A desk study, interview and questionnaire survey were carried out to identify

the causes of variation orders, their impacts on public building projects and to seek

recommendations to reduce them. The desk study conducted on five selected projects and the

causes of variation orders and their impacts on the projects were identified. Interviews were

made with selected experienced public building project participants for expert opinion. The

questionnaire responses were analyzed using the relative index method. A triangulation

method on the desk study, survey and the literatures was done to improve the validity of the

findings from the study. The results indicated that design changes, incomplete contract

documents, and impediment in prompt decision making process were the most causes of

variation orders. The results also showed that completion schedule delay, increase in project

cost, and additional payments for contractor were the most impact of variation orders. The

findings also suggested the most recommended strategies to minimize variation orders. These

strategies were to produce a concluding design and contract document, to complete drawings

at tender stage, and to supervise the works with experienced and dedicated supervisor to

minimize variation orders on public building projects. The study concluded based on the

findings of the research and recommendations for further studies were forwarded to minimize

variation orders.

Key words: Variation order, cause, impact, public projects, Addis Ababa.


Addis Ababa University 1 Addis Ababa Institute of Technology

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The construction industry in Ethiopia has been on fast growing mode which plays an

instrumental role in the country development. Addis Ababa in the last ten years experienced a

huge volume of work in the field of constructions. This resulted in a very rapid growth and

transformation during this period. The city has generated many facilities and government

buildings opportunities. The growth of the city is being accelerated due to the construction of

private and government owned buildings. Large and complex government buildings have

been built, attracting domestic contractors and construction companies from all over the

world. This situation coupled with inexperienced consultants and the client has led to

inadequate design resulting in many changes to plans, specifications, and contract terms

which resulted in variation orders.

With the announcement of the government five years Growth and Transformation Plan (GTP)

in 2010, the construction industry is said to be the most beneficial sector as there lots of

projects being rolled out by the government and to be carried out in the five years plan. The

implementation of government projects are expected to provide further thrust to the

construction sector in the country. Therefore, it is important to ensure these projects are being

implemented successfully without any major problems while minimizing the adverse impacts

of variation orders on the project outcome.

As the number of variation orders on a project increases, so does the possibility of

misunderstanding among the contracting parties. Such a misunderstanding may occur

because one or more of the parties lacks full knowledge of the variation order process itself,

the costs involved in implementing changes, or the delays, conflicts, and interruption of the

construction sequence and schedule which can adversely impact project coordination.

Previous studies on variation orders are mainly focused on the sources and causes of variation

orders. The sources of variations include the performance of construction parties, resources

availability, environmental conditions, involvement of other parties, and contractual relation.

Many times delays, cost overrun and quality defects of a construction can be attributed to

variation at various stages of the project (Burati et al., 1992). Variations and conflicts in



construction projects, at work, and even in our daily lives are very common (Arain and Low,

2006).

Variation orders involved alteration, addition, omission, and substitution in terms of quality,

quantity and schedule of work (Adnan et al., 2010). Any addition, deletion, or any other

revision to project goals and scope of work are considered to be variation, whether they

increase or decrease the project cost or schedule (Ibbs et al., 2001). The work of Sun and

Meng (2008) mentioned that a variation in construction projects refers to an alteration to

design, building works, project programs or project aspects caused by modifications of

preexisting conditions, assumptions, or requirements. Variation orders have an impact on

overall project performance (Ruben, 2008). This is because variations can cause substantial

adjustment to the contract duration, total direct and indirect cost, or both.

In most cities of the country like Addis Ababa where new infrastructure and buildings are

being built, the occurrence of variation orders on public projects seems usual. Most public

building projects in Addis Ababa were delayed with certain amount of variation orders

increasing from the original value of the contract sum. According to the team leader of Addis

Ababa Housing Development and Construction Bureau, Supervision and Follow-up

department, variation is ordered for most of the projects. The projects were delayed and the

cost of the projects increased. The focus of this study would be on public building projects

being built in Addis Ababa from July 2010G.C to the end of June 2012G.C. Due to general

background of the problem in the construction industry and the specific problem within the

public buildings, there is a cause for a study to be made on assessment of the impact of

variation orders on public building projects in Addis Ababa.

1.2 Statement of the Problem

Nowadays, variation orders have become a common problem in public building projects in

Addis Ababa. Variation orders are issued to correct or modify the original scope of work

because changes during construction of projects are unavoidable. The major causes of delay,

disputes and sometimes generate significant cost and environmental impacts are variation

orders issued during construction of projects. Yet, no unique method is available for

minimizing variation orders effectively. However, their impact can be minimized with an

appropriate study about the causes. Variation orders on public building projects have the

potential to impact public building projects, and the identification of their causes might lead



to their reduction, possible elimination and subsequent improvement in overall performance

of public building projects.

1.3 Aim and Objectives of the Study

Based on the problem statement above, the aim of this study is to assess the impact of

variation orders on public building projects in Addis Ababa in order to take remedial

measures to minimize them.

The objectives of the study are:

To determine the causes of variation orders;

To identify the impacts of variation orders; and

To recommend strategies to minimize variation orders.

The following research questions pertain to offices consisting of public building project

management teams in Addis Ababa. The overall purpose of this research is to minimize the

impact of variation orders on public building projects, thereby increasing the effectiveness in

both a project and a government. Thus formulating and answering the following research

questions could define the overall purpose:

What are the causes of variation orders?

What are the impacts of variation orders?

How can we minimize variation orders?

1.4 Scope of the Study

There are many projects which are currently under construction in Ethiopia. In order to

achieve the stated objectives of the study, the scope would be too large to tackle. Therefore,

the study will be limited to Addis Ababa city where many public building projects are under

construction. This scope limitation is done due to limitation of budget and schedule of the

research. Data to be used will include only G+3 and above with and without basement of

public building projects which are under construction those issued from the commencement

of work from July 2010 to the end of June 2012 G.C and more than 60% completed projects.



1.5 Significance of the Study

Since variation orders can have numerous negative impacts to projects cost and schedule, it

will be important to identify the major causes those contribute to variation orders and to study

the impacts of variation orders and possible strategies to minimize them during the

implementation of public building projects. The study will be supportive for public building

construction stakeholders in general and for Addis Ababa city government public building

construction stakeholders specifically to take remedial measures to reduce the occurrence of

the problem. The study will also be helpful for the government in general and most technical

departments such as Housing Development and Construction Bureau (HDCB) in assessing

and taking remedial measures for reducing the impact of variation orders.

1.6 Structure of the Research

Research writing is the final step of the study and it contains five main chapters. These are

the introduction, literature review, the research methodology, data analysis and discussions,

and conclusion and recommendations.

Chapter One: Introduction: This chapter comprised the background of the study, problem

statement, aim and objectives, significance and limitations of the study, and structure of the

research.

Chapter Two: Literature Review: The literature review started with literature exploration

of the electronic and hard copy media in answering the research objectives. The causes and

impact of variation orders as well as strategies to minimize variation orders on building

projects were discussed.

Chapter Three: Research Methodology: This chapter discussed the tools and methods used

for data collection.

Chapter Four: Data Analysis and Discussions: This chapter constituted the analysis of data

gathered with the research instruments. It analyzed data from the desk studies, questionnaire

and the interview.

Chapter Five: Conclusion and Recommendations: This is the final chapter of the research

in which conclusions and recommendations were drawn based upon the analysis data, linking

them to the problem statement and objectives of the study.



Generally, the research was written following a certain structure. Though step order may vary

depending on the subject matter and researcher, the steps outlined in Figure 1.1 below were

followed in this study;

Figure 1.1: Structure of the research

Literature Review

Data Collection

Data Analysis

Conclusion and

Recommendations

Literatures search using electronic and hard copy of books and journals

Identify the variables for the three objectives of the study

Desk Study: Archival records such as monthly reports and payment certificates on selected projects for causes and impacts of variation orders

Survey:-Interview- Interview with selected public building participants -Questionnaire- distribution of questionnaire to the relevant parties

Evaluate the main causes of V.O Evaluate the main impacts of V.O Evaluate recommended strategies to

minimize V.O

Conclude the findings Recommendation for improvements

and suggestions for further research

Introduction Identify the problem Establish objectives Define scope of the study Explain significance of the study



CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

Construction project is a mission, undertaken to create a unique facility, product or service

within the specified scope, quality, time and cost. In practice, however, some construction

projects encounter variation, delay on completion time or poor workmanship upon

completion.

The one thing certain on any project is that there will be variations occurring along the way

sometimes even before the signing of the contract. Variations are inevitable in any

construction projects (Ibbs et al., 2001). Nothing is more constant than variation during the

course of a construction project. Despite the best efforts of all concerned during the planning,

implementation and administration of the contract, variation will almost certainly occur. The

variations and variation orders can be detrimental in any project, if not considered

collectively by all participants (Arain and Low, 2005). The most frequent type of variation

met in building projects are variations to the original scope of work or those that arise from

unexpected conditions in the field. Even two buildings of same design, that is very similar,

have differences caused by the terrain, existing utilities, or other factors such as subsurface

conditions. Basically variation orders are acceptable as part of the contract administration

process.

This chapter reviews literatures related to variation orders; including: definition of variation

order; nature and type of variation orders; contractual provisions relative to variation orders;

variation orders and project delivery systems, management of variation orders, causes and

impacts of variation orders; and recommended strategies to minimize variation orders on

public building projects.

2.2 Definition of Variation

There is no single definition of what constitutes a variation. The term ‘variation’ as described

and/or defined by various standard forms of contract differs from one to another but in

principle the definition and/or meaning is more or less similar. Usually, any standard form of



building contract will contain a definition of a variation in terms of specific actions and

activities.

The building contract dictionary defined variations as alterations, additions or omissions in

work, materials, working hours, work space, etc.

As defined in PPA (2006), “variation” is an instruction given by the engineer, which varies the

works.

According to FIDIC (1999), “variation” means any change to the works, which is instructed

or approved as a variation.

Hayati (2006) described that each standard form of building contract has its own definition

but clearly ‘variation’, in generic sense, refers to any alteration to the basis upon which the

contract was let. This means the term embraces not only changes to the work or matters

pertaining to the work in accordance with the provisions of contract, but also changes to the

contract conditions themselves.

According to Hayati (2006) variation can be taken to be any, a combination of any or all of

the following:

i. Variation in building projects may mean ‘the alteration or modification of the design,

quality or quantity of the works, as shown upon the contract drawings and described

by or referred to in the contract bills, and includes the addition, omission or

substitution of any work, the alteration of the kind or standard of any of the materials

as goods to be used in the works, and the removal from the site of any work materials

or goods executed or brought thereon by the contractor for the purposes of the works

other than work or material or goods which are not in accordance with the contract’.

ii. Variations in building projects with instructions concerning the nature of the works

which are not specifically termed as variation in the contract documents.

iii. Variation of contract in law, i.e. if both parties alter a contract document by

agreement after execution of the original contract this is a variation of the contract

terms or conditions.



iv. Variation of price clause which enables the contract sum to be adjusted for rises and

falls in the cost of labour or materials.

Hibberd (1986) defined variation as any changes in the quality or quantity of the works as

mentioned or spelled out in a contract document. Bin-Ali (2008) defined variation orders as

any deviation i.e., alteration, addition or omission, from the contract with regard to contract

drawings, specifications, and/or bills of quantities. Variation order was also defined as the

alteration or modification of the design, quality of works, as agreed upon the contract

drawings, bill of quantities, and/or specifications (Bin-Ali, 2008).

Popescu (1995) indicated that a contract variation order is when a change is made in the

original contract that will affect the scope of work. Variation order is authorized by the owner

and is often initiated by the contractor. Schexnayder et al. (2004) explained that the variation

order directives issued by the owner to change the contract by adding or subtracting features

within the scope of the work. Variations that are outside the scope of work require a

supplementary agreement. Variation orders change the details or conditions of the work and

they are used to add “extra” or delete work.

In general, the term ‘Variation’ usually means a change, modification, alteration, revision or

amendment to the original intent of the contract and/or its works. A variation order is the

formal document that is used to modify the original contractual agreement and becomes part

of project’s documents (Fisk, 1997). Furthermore, a variation order is a written order issued

to the contractor after the contractual agreement by the owner, which authorize a change in

the work or an adjustment in the contract sum or even the contract time.

2.3 Nature and Types of Variation Orders

2.3.1 Nature of Variation Orders

The research team Ming et al. (2004) reported that project variations can be classified as

“anticipated variations” and “emergent variation”. Anticipated variations are planned in

advance and occur as intended. On the other hand, emergent variation arise spontaneously

and are not originally anticipated or intended. Another way to view project variation is

through its necessity. In this way, project variation can be classified as “elective variations”

and “required variations”. According to Ming et al. (2004) an elective variation is where one



may choose whether or not to implement; and a required variation is where there is no option

but to make the variation.

No matter how carefully a project is planned and scheduled, it is almost certain that there will

be variations before the project is completed. As sited in the works of Ruben (2008), the type

of variation orders can be determined by referring to both the reasons for their occurrence and

subsequent effects. (Arain & Pheng, 2005) distinguished two types of variation orders,

namely: beneficial and detrimental variation orders.

2.3.1.1 Beneficial variation orders

As Arain & Pheng (2005) described, a beneficial variation order is one issued to improve the

quality standard, reduce cost, schedule, or degree of difficulty in a project. This type of

variation order eliminates unnecessary costs from a project as a result; it optimizes the client's

benefits against the resource input by eliminating unnecessary costs. This means beneficial

variation orders initiated for value analysis purposes to realize a balance between the cost,

functionality and durability aspects of a project to the satisfaction of clients. Value analysis is

an organized approach to the identification and elimination of unnecessary costs which are

defined as costs which provide neither use, nor life, nor quality, nor appearance, nor customer

features (Kelly & Male, 2002). Value analysis describes a value study of a project that is

already built or designed and analyses the product to see if it can be improved (Zimmerman

& Hart, 1982). Therefore, a variation order is beneficial if it is initiated to enhance the client's

value. Among others, the client's value system elements include time, capital cost, operating

cost, environment, exchange or resale, aesthetic/esteem and fitness for the purpose (Kelly &

Duerk, 2002). A beneficial variation order, therefore, seeks to optimize the client's benefits

against the resource input by eliminating unnecessary costs. These benefits are understood to

be the satisfaction of perceived needs for public building projects that include social,

economic and commercial aspects.

Additionally, a beneficial variation is initiated in the spirit of adding value to the project.

However, it should be noted that regardless of how beneficial a variation order might be non

value-adding costs are likely to accrue as a result (Ruben, 2008). For example a variation

order to solve the discrepancies between contract documents involves the abortion of works

that have already been executed. Cost for aborted works should not have been incurred if

discrepancies were not found between contract documents.



2.3.1.2 Detrimental variation orders

According to Arain & Pheng (2005), a detrimental variation order is one that negatively

impacts the client's value or project performance. For example a client who is experiencing

financial problems may require the substitution of quality standard expensive materials to

substandard cheap materials. Arguably, a detrimental variation order compromises the client's

value system. For example, in marine construction, steel window frames result in steel

oxidation if selected instead of timber or aluminum frames.

2.3.2 Types of Variation Orders

Variations in construction projects are very common and likely to occur from different

sources, by various causes, at any stage of a project, and may have considerable negative

impacts on items such as costs and schedule delays. A critical variation may cause

consecutive delays in project schedule, re-estimation of work statement, and extra demands

of equipment, materials, labor, and overtime. Variations, if not resolved through a formalized

variation management process, can become the major source of contract disputes, which is a

severe risk contributing to project failure.

Classifications of variations in general terms apply to changes in construction domain.

Motawa et al. (2007) summarized variations as Table 2.1 below:

Table 2.1: Types of variation (Motawa et al., 2007)

Bases of variation Types of Variation

Time Anticipated or Emergent, Proactive or Reactive, or

Pre-fixity or Post-fixity

Need Elective or Required, Discretionary or Nondiscretionary,

or Preferential or Regulatory

Effect Beneficial, Neutral or Disruptive



2.4 Contractual Provisions Relative to Variation Orders

Most standard forms of contract include a clause under which the employer or his

representative is able to issue an instruction to the contractor to vary the works which are

described in the contract. A change in shape of the scheme, the introduction of different

materials, revised timing and sequence are all usually provided for by the variations clause. It

will also usually include a mechanism for evaluating the financial effect of the variation and

there is normally provision for adjusting the completion date. In the absence of such a clause

the employer could be in a difficulty should a variation to the works be required. The

contractor could either refuse to carry out the work or undertake the work or insist upon

payment on a quantum merit or fair valuation basis. Calculation of the price for the extra

work applying this method could involve payment in excess of the contract rates.

Among the different conditions of contract, the Federation Internationale Des Ingenieurs

Conseils (FIDIC), Ministry of Urban Development and Construction (MUDC), and Public

Procurement (PPA) are widely used in Ethiopian construction industry. These contract

conditions clearly define the duties and responsibilities of the parties involved in the contract

and it describes the guidelines for contract administration, they consequentially alter variation

of construction works unless and otherwise they are deleted or replaced by other words or

sentences in the specific conditions of contract for a project.

2.4.1 General Conditions of Contract for Procurement of Works (PPA, 2006)

Even though contract conditions include the usual variations clause there may be

circumstances which could lead to additions or changes introduced by the employer which

falls outside the variations clause. Variation related clauses as described under clause 38, 39

and 40 of Public Procurement Agency (PPA, 2006) concerning variations and payment of

variations are as follows:

Clause 38.1: If the final quantity of the work done differs from the quantity in the bill

of quantities for the particular item by more than 25 percent, provided the change

exceeds 5 percent of the initial contract price, the engineer shall adjust the rate to allow

for the change. This clause is applied for admeasurements contract.



Clause 39.1: All variations shall be included in updated programs (or in the case of

lump sum contracts in updated programs and activity schedules) produced by the

contractor.

Clause 40.1: For both admeasurements and lump sum contracts, the contractor shall

provide the engineer with a quotation for carrying out the variation when requested to

do so by the engineer. The engineer shall assess the quotation, which shall be given

within seven days of the request or within any longer period stated by the engineer and

before the variation is ordered.

Clause 40.2: For admeasurements contracts only, if the work in the variation

corresponds with an item description in the bill of quantities and if, in the opinion of the

engineer, the quantity of work above the limit stated in sub-clause 38.1 or the timing of

its execution do not cause the cost per unit of quantity to change, the rate in the bill of

quantities shall be used to calculate the value of the variation. If the cost per unit of

quantity changes, or if the nature or timing of the work in the variation does not

correspond with items in the bill of quantities, the quotation by the contractor shall be in

the form of new rates for the relevant items of work.

Clause 40.3: For both admeasurements and lump sum contracts, if the contractor’s

quotation is unreasonable, the engineer may order the variation and make a change to

the contract price, which shall be based on the engineer’s own forecast of the effects of

the variation on the contractor’s costs.

Clause 40.4: For both admeasurements and lump sum contracts, if the engineer decides

that the urgency of varying the work would prevent a quotation being given and

considered without delaying the work, no quotation shall be given and the variation

shall be treated as a compensation event.

Clause 40.5: For both admeasurements and lump sum contracts, the contractor shall not

be entitled to additional payment for costs that could have been avoided by giving early

warning.



2.4.2 Standard Condition of Contract for Civil Works Project (MUDC, 1994)

According to Ministry of Urban Development and Construction (MUDC, 1994) conditions of

contracts for construction of civil works project, variation related clauses are read as follows:

Clause 51, Variations: The engineer shall make any variation of the form, quality or

quantity of the works or any part thereof that may, in his opinion, be necessary and for

that purpose, or if for any other reason it shall, in his opinion be desirable, he shall

have power to order the contractor to do and the contractor shall do any of the

following:

(a) Increase or decrease the quantity of any work included in the contract,

(b) Omit any such work,

(c) Change the character or quality or kind of any such work,

(d) Change the levels, lines, position and dimensions of any part of the works, and

(e) Execute additional work of any kind necessary for the completion of the works

and no such variation shall in any way vitiate or invalidate the contract, but the

value, if any, of all such variations shall be taken into account in ascertaining

the amount of the counteract price.

Clause 52, Valuation of variations: All extra or additional work done or work omitted

by order of the engineer shall be valued at the rates and prices set out in the contract if,

in the opinion of the engineer, the same shall be applicable. If the contract does not

contain any rates or prices applicable to the extra or additional work then suitable rates

or prices shall be agreed upon between the engineer and the contractor. In the event of

disagreement the engineer shall fix such rates or prices as shall, in his opinion, are

reasonable and proper.

2.4.3 General Conditions of Contract for Civil Works (UNDP, 2000)

A construction contract condition which developed for United Nations Development Program

(UNDP, 2000) projects described variation in the following clauses:

Clause 15a: The engineer may instruct the contractor, with the approval of the

employer and by means of change orders, all variations in quantity or quality of the

works, in whole or in part, that are deemed necessary by the engineer.



Clause 48.1: The engineer may within his powers introduce any variations to the form,

type or quality of the works or any part thereof which he considers necessary and for

that purpose or if for any other reasons it shall, in his opinion be desirable, he shall

have power to order the contractor to do and the contractor shall do any of the

following:

(a) increase or decrease the quantity of any work under the contract;

(b) omit any such work;

(c) change the character or quality or kind of any such work;

(d) change the levels, lines, positions and dimensions of any part of the works;

(e) execute additional work of any kind necessary for the completion of the

works, and no such variation shall in any way vitiate or invalidate the contract.

For an increase cost of contract or altering the works due to variations according to this

condition is stipulated under clause 48.2 as follows.

Clause 48.2: The engineer shall, however, obtain the written approval of the employer

before giving any order for any variations which may result in an increase of the

contract price or in an essential alteration of the quantity, quality or character of the

works.

Clause 48.3: No variations shall be made by the contractor without an order in writing

from the engineer. Variations requiring the written approval of the employer under

clause 48.2 shall be made by the contractor only upon written order from the engineer

accompanied by a copy of the employer's approval. It is provided that, subject to the

provisions of the contract, no order in writing shall be required for any increase or

decrease in the quantity of any work where such increase or decrease is not the result

of an order given under this clause but is the result of the quantities exceeding or being

less than those stated in the bill of quantities.

2.4.4 Conditions of Contract for Construction (FIDIC, 1999)

The FIDIC (1999) under clause 3.3, it stipulates that the engineer may issue to the contractor

instructions and additional or modified drawings which may be necessary for the execution of

the works and the remedying of any defects, all in accordance with the contract. But, not all



instructions vary the contractual arrangements or the way the works are being undertaken. As

stated under clause 13.1 of FIDIC (1999), variations may be initiated by the engineer at any

time prior to issuing the taking-over certificate for the works, either by an instruction or by a

request for the contractor to submit a proposal.

The contractor shall execute and be bound by each variation, unless the contractor promptly

gives notice to the engineer stating (with supporting particulars) that the contractor cannot

readily obtain the goods required for the variation. Upon receiving this notice, the Engineer

shall cancel, confirm or vary the instruction.

As FIDIC (1999) stipulates, each variation may include:

(a) changes to the quantities of any item of work included in the contract (however,

such changes do not necessarily constitute a variation).

(b) changes to the quality and other characteristics of any item of works.

(c) changes to the levels, positions and/or dimensions of any part of the works.

(d) omission of any work unless it is to be carried out by others.

(e) any additional work, plant, materials or services necessary for the permanent

works, including any associated tests on completion, boreholes and other testing

and exploratory work. or

(f) changes to the sequence or timing of the execution of the works.

The FIDIC (1999), under clause 13.2 states that the contractor may, at any time, submit to the

engineer a written proposal which (in the contractor’s opinion) will, if adopted, (i) accelerate

completion, (ii) reduce the cost to the employer of executing, maintaining or operating the

works, (iii) improve the efficiency or value to the employer of the completed works, or (iv)

otherwise be of benefit to the employer.

Under clause 13.3 of FIDIC (1999), it stipulates that if the engineer requests a proposal, prior

to instructing a variation, the contractor shall respond in writing as soon as practicable, either

by giving reasons why he cannot comply (if this is the case) or by submitting:

(a) a description of the proposed work to be performed and a program for its execution

(b) the contractor’s proposal for any necessary modifications to the program according

to the program stated and to the time for completion, and



(c) the contractor’s proposal for evaluation of the variation.

The engineer shall, as soon as practicable after receiving such proposal, respond with

approval, disapproval or comments. The contractor shall not delay any work whilst awaiting

a response. Each instruction to execute a variation, with any requirements for the recording of

costs, shall be issued by the engineer to the contractor, who shall acknowledge receipt.

Each instruction to execute a variation, with any requirements for the recording of costs, shall

be issued by the engineer to the contractor, who shall acknowledge receipt. Each variation

shall be evaluated in accordance with clause 12 [Measurement and Evaluation: It states that

the works shall be measured, and valued for payment], unless the engineer instructs or

approves otherwise in accordance with this clause.

Even though the above contract conditions include the usual variations clause, there may be

circumstances which could lead to additions or changes introduced by the employer which

falls outside the variations clause. Contractors who find themselves with unattractive contract

prices would find it to their advantage to be able to argue that a change introduced by the

employer fell outside the variations clause thus leaving the way open to argue that payment

for the change should be on a quantum merit or fair valuation basis. In the above different

contractual provisions, all the contracts have stipulated the various methods by which the

contractor will be reimbursed. The contracts have a specific procedure covering the process

of handling variations to the work.

2.5 Variation Orders and Project Delivery Systems

A project delivery system is a system designed to achieve the satisfactory completion of a

construction project from conception to occupancy. A project delivery method may employ

any one or more contracting formats to achieve the delivery.

Every owner responsible for the implementation of a construction project must make an early

and important decision regarding the method by which the project will be designed and

constructed (Odabasi et al., 2003). Because of financial, organizational and time constraints,

various project delivery methods have evolved to fit particular project and owner needs.

Methods that have gained in popularity include Design-Bid-Build (DBB), Design-Build

(DB), and the latest, Integrated Project Delivery (IPD). Proponents of particular alternative



methods advocate or promise improvements over the traditional system in terms of project

schedule and cost control, and the number of disputes (Levy, 2006). The Integrated Project

Delivery method, although to date only used on a negligible number of projects, is included

here due to interest in understanding the concept.

2.5.1 Design-Bid-Build (DBB)

The Design-Bid-Build (DBB) approach is the most accepted traditional project delivery

method today, especially for public projects in Addis Ababa. In DBB, the project is separated

into a design phase and construction phase. With two well-defined phases, construction will

start once the design is completed, while the drawings become the basis for the bidding

documents. Because the owner is more certain about the finished product, usually a lump sum

contract is implemented in a DBB project (Odabasi et al., 2003).

The DBB system remains the most frequently used delivery method for construction projects

(Levy, 2006). Using this method, the owner engages a designer to prepare the design of the

project, including construction drawings, and specifications. Once completed, the bid

document, including the design and bidder’s information packet, is presented to interested

contractors who prepare and submit their bids for the work. The owner will select a

contractor, usually based on the lowest responsive and responsible bid (for most public

works), or some hybrid of price and technical merit. The selected general contractor will then

execute contracts with subcontractors to construct various specialty items. The contractor is

responsible for constructing the facility in accordance with the contract documents. The

designer typically maintains limited oversight of the work and responds to questions about

the design on behalf of the owner (Levy, 2006).

2.5.2 Design-Build (DB)

Design-Build (DB) is the oldest approach that is regarded as an alternative project delivery

method. During ancient times in Mesopotamia and Egypt, the master builder was responsible

for the design and construction of the entire project. This continued to be the most commonly

used project delivery method until the late 19th century, when advances in science and

technology allowed the fields of architecture and engineering to become two different

professions (Songer and Molenaar, 1996). The contractor usually has the task of assembling a

group of designers and constructors to perform the job for this type of delivery method.



According to Levy (2006), the owner contracts with a DB team, which can be a joint venture

of a contractor and a designer, a contractor with a designer as a sub-consultant, a designer-led

team with a contractor as a subcontracted entity, or a single firm capable of performing both

design and construction. Since contractors are most comfortable in the role of risking

corporate capital in performing projects, they usually are the lead members of this sort of

team. One variation of the typical DB team structure, known as fee-paid developer, involves

the owner engaging a developer, which then selects its own designer and contractor partners.

However formulated, the DB team performs the complete design of the facility, usually based

on a preliminary scope or design presented by the owner.

At some point early in the process, through a prescribed process, the DB team will establish a

fixed price to complete the design and construction of the facility. Once underway, the DB

team is then responsible for construction of the project, and for all coordination between

design and construction.

2.5.3 Integrated Project Delivery (IPD)

Integrated Project Delivery (IPD) contracts are a relatively new to our marketplace and no

projects have been carried out using these contracts. Pure IPD, in its contractual sense,

requires a multiparty agreement among the prime players in the design and construction

process – at least the owner, the designer and the builder – but this agreement can include

many of the important sub-consultants and subcontractors as well (Levy, 2006).

Regarding project delivery systems and variations, some researchers have examined and

described some points. Ibbs et al. (2003), examines the relationship between impacts on

project change as against the DBB and DB project procurement method. They also found out

that, design, bid and build contracts experienced a higher number of changes and change in

cost against design and build contracts. The results obtained were consistent with studies

carried out earlier by Konchar and Sanvido (1998). Ibbs et al. (2003) also found that changes

to the schedule effects the total project duration and the worst effect if the design, bid and

build delivery system.



2.6 Management of Variation Orders

Construction contracts are complex both in nature and the process required to realize the

finished product. So variation is common on construction projects. Variation orders are

typically issued in the form of contract instructions.

Once a variation order has been instructed and works are carried out, the employer has to

reimburse the contractor for the same. This obligation of the employer involves certain

activities or stages for measurement of works, valuation of the varied works and payment for

the varied works.

According to Ssegawa et al. (2002) contractual clauses state how variation orders should be

initiated. In all cases, variation orders are issued by the consultant and must be given in

writing or oral instruction should be subsequently confirmed in writing (Wainwright &

Wood, 1983; FIDIC, 1999; Finsen, 2005; JBCC, 2005; Ssegawa et al., 2002). Since the

contractor is not bound to comply with the oral instructions, all oral instructions have to be

confirmed in writing by either the consultant or the contractor. Where variation orders are

confirmed in writing by the contractor, the consultant has to confirm by signature. If the

contractor is agreeable with the variation order, the works should proceed. The contractor and

the consultant agree upon which method of valuation of variation orders should be used.

The valuation of variation orders, while seen as an administrative step in the remuneration of

changes effected to the contract, is in reality a rather complex matter involving a thorough

understanding of contractual provisions, costing principles and an exercise of fair judgment

on the part of the evaluators (Wainwright & Wood, 1983; JBCC, 2005).

According to Wainwright et al. (1983), the valuation of variation orders may be in the form

of:

Rates where contracted rates are adopted where the varied works are of similar

character and extent and executed under similar conditions to items in the contract bills;

Day works which consist of the payment of executed works on a basis calculating the

prime cost of works including materials, labour, plant hire and transport plus a

percentage addition as agreed between parties to the contract;

Quotation where contractors submit a quotation to effect the work contained in a

variation order; and



Quantum meruit is a miscellaneous method where negotiated or agreed rates or

payment are made on a reasonable sum.

Ming et al. (2004) defined a generic variation management process model (Figure 2.1). The

generic model consists of four stages, start up, identify & evaluation, approval, and

implement & review (Ming et al., 2004)

2.6.1 Start Up

This contains the proactive requirements that are essential for effective variation

management. These requirements enable the project team to respond readily to variation, to

manage variation effectively, and to facilitate contingency plans for any anticipated variation.

2.6.2 Identify and Evaluate

During a construction project, some variations can be anticipated while others may occur

unexpectedly. The aim of the project team is to actively seek to identify potential variations at

the earliest opportunity. This can be achieved by considering whether any of the potential

variation causes are likely to be present in a project. Once a potential variation is identified,

evaluation can be carried out in order to assist with the decision making process. Evaluation

steps may include implications assessment and optimum selection of variation options.

2.6.3 Approval

Once the evaluation step has been completed it will need to be approved by appropriate

member of the team (usually the project manager) and may be by the client depending on the

nature of the variation. In order to approve a variation it is necessary for the people involved

to see the impact that the variation will have on the project. There may be several iterations

during the approval process.

2.6.4 Implement and Review

Once a variation is approved, it needs to be communicated to all team members whose work

is affected by the variation. If necessary, schedule of work needs to be adjusted and new

schedule needs to be agreed by the whole team. Finally, the project team should review and

learn lessons from the process of the variation event.



No reconsider other variation options yes, but not sure Yes about estimation

Figure 2.1: Variation management process (Ming et al., 2004)

Start up

Identify variation

Evaluate variation

Criteria

Options

Internal review

Approval for minor variations

Rejection

Client approval

Rejection

Negotiation

Final variation proposal & confirm instructions

Issue information to relevant project team members

Design and project base-line updated & issued to all parties involved

Record decision reached

Finish

Team notified

Dispute resolution (if applicable)

Start Up

Iden

tify & Evalu

ate A

pp

roval

Imp

lement an

d R

eview



2.7 Causes of Variation Orders

Various authors had identified different causes of variation orders in construction projects

both on the private and public projects. Contractual clauses relating to variation allows parties

involved in the contract to freely initiate variation orders within the ambit of the scope of the

work without alteration of the original contract (Ruben, 2008). But variation orders are

common in construction projects, and improved understanding would require identifying

their causes. The works of many researchers show that that variation has come to stay as part

of the construction projects and it cut across various stakeholders.

The causes of project variation may originate from either external or internal pressures that

are being applied to the project (Ming et al., 2004). External causes may be due to

technological changes, changes in the customer expectations and tastes, changes in

competitor’s activities, changes in government and policies, changes in the economy and

finally demographic changes in the society. Internal causes may result from changes in

management policy, changes in organizational objectives and changes in the long-term

survival strategy of the organizations involved.

According to Sunday (2010), the main causes of variation orders on construction projects are

inadequate working drawing details, design discrepancies, conflicts between contract

documents, the change of plans or scope by owner, impediment in prompt decision making

process, inadequate project objectives, and replacement of materials or procedures, differing

site conditions, shortage of skilled manpower, contractor’s desired profitability and

contractor’s financial difficulties.

Variation orders arise due to different causes. Some are foreseeable, others are not. Some

result from a genuine change of circumstances and others from the design team’s own

inadequacies. Arain and Pheng (2006) categorized causes of variations in to four origin

agents. These are client, consultant, contractor and others related changes. This means the

owner, the consultant, the contractor or other s can directly initiate variations or the variations

are required because one of the parties fails to fulfill certain requirements for carrying out the

project. As Mohammad et al. (2010) identified, change of plan by the owner, substitution of

materials by the owner, change in design by the consultant, errors and omissions in design,

and owner’s financial problems are the main causes of variation orders.



Ming et al. (2004) noted that at a more detailed level, the causes of construction project

variation are usually generated from either design or construction activities. The design

generated causes include design changes, design errors, omissions and operational

improvements. Construction driven causes are often linked to the unsatisfactory site

conditions that hinder good workmanship, material handling and plant operation. The design

and construction issues must be considered in conjunction with how the team is managed,

coordinated and communicated with to reduce problems resulting from insufficient work

separation, insufficient construction planning and disturbance in personnel planning.

Ssegawa et al. (2002) investigated the opinion of project parties regarding the frequency of

occurrence, causes, and originators of variation orders. The study found that additions and

omissions are the most common cause of variations in projects, which represented about

45.7% of all variation orders in building projects. Substitutions were considered the third

most important cause of variations. The study further revealed that restriction on working

conditions (space, access), and replacement of employee were ranked very low occurrence.

The main causes of omission related variations were lack of financial, design changes and

feasibility of construction. The study results indicated that client and architect caused most of

the omission due to financial reasons, design and changes of drawings, and feasibility of

construction. As Ruben (2008) found out, the most frequent causes of variation orders were

change of schedule, specifications and design and errors in design and inadequate working

drawing details.

Lots of studies are conducted to identify the causes of variation orders (Mohammad et al.,

2010; Arain and Pheng, 2006; Sunday, 2010; Ssegawa et al. (2002); Gray and Hughes, 2001;

Ruben, 2008; Al-Hammad and Assaf, 1992; Thomas and Napolitan, 1994; Clough and Sears,

1994; Assaf, et al., 1995; Puddicombe, 1997; Fisk, 1997; O’Brien, 1998; Mokhtar, et al.,

2000; Kumaraswamy, et al., 1998; O’Brien, 1998). List of causes of variation orders

identified from the above discussed sources are shown in Table 2.2 below.



Table 2.2: Causes of variation orders (Ruben, 2008)

S.N Causes of variation orders 1 Change of plans or scope 2 Change of schedule 3 Change in specifications 4 Change in design 5 Errors and omissions in design 6 Inadequate working drawing details 7 Non-compliant design with government regulations 8 Impediment in prompt decision making process 9 Unforeseen problems 10 Replacement of materials or procedures 11 Inadequate shop drawing details 12 Lack of judgment and experience 13 Financial problems 14 Inadequate scope of work for one or more parties to the contract 15 Design complexity 16 Lack of communication 17 Defective workmanship 18 Design discrepancies 19 Inadequate project objectives 20 Long lead procurement 21 Lack of coordination 22 Fast track construction 23 Ambiguous design details 24 Unavailability of skills 25 Weather conditions 26 Lack of strategic planning 27 Lack of knowledge of available materials and equipment 28 Lack of involvement in design of one or more parties to the contract 29 Non-compliant design with owner's requirement 30 Health and safety considerations 31 Lack of a specialized construction management 32 Obstinate nature of one or more of the parties to the contract 33 Differing site conditions 34 Poor procurement process 35 Conflicts between contract documents 36 Value engineering 37 Change in economic conditions 38 Honest wrong beliefs of one or more parties to the contract 39 Lack of required data 40 Unavailability of equipment 41 Unfamiliarity with or unawareness of local conditions 42 Socio-cultural factors 43 Change in government regulations 44 Speculation on desired profitability 45 Technology change



2.8 Impact of Variation Orders on Building Projects

Impact is defined in electronic Webster dictionary as “the force of impression of one thing on

another”. In construction, variation orders can impact portions of the project directly or

indirectly and result in reduced productivity. This is always a subjective issue as the

contractor feel that the loss due to variation order is the fault of the designers and owners.

Conversely, owners typically claim that the loss in productivity is due to poor management

on the part of the contractors. However, not every variation order will impact the productivity

of the project.

Variations in any planned activity will cause a disturbance and will require the rearrangement

or review of the existing plan under the recent developments. Given the complex, multi-party

and multi resource nature of the construction industry, it is not difficult to perceive the

impacts of changes on projects.

Impacts of variations were observed by many researchers and its occurrence has an adverse

impact on project performance. Ruben (2008) found that variation orders had an impact on

overall project performance and the major adverse impact of variation orders are time and

cost overruns and disputes between the parties to the contract. Thomas et al. (2002) suggest

that variability generally impedes project performance. Ibbs (1997) concluded that variation

orders affect project performance as they adversely affect productivity and project costs.

According to Arain and Pheng (2005b) variation orders are an unwanted but inevitable reality

of any construction project. Further, Hanna et al. (2002) found that projects with many

variation orders cause the contractor to achieve lower productivity levels than planned.

Variation orders adversely impact project performance in terms of cost overruns, time

overruns, quality degradation, health and safety issues and professional relations. Numerous

studies have been done to identify the impacts of variations, relationships between variation

and its impacts (Hanna et al., 2002; Hester et al., 1991; Thomas and Napolitan, 1994; Osman

et al., 2009; Ibbs, 1997; Arain and Pheng, 2005b; Haldun, 1998; CII, 1990; Ibbs, 1995).

The 16 impacts identified from the literature review, as shown in Table 2.3: are discussed

below.



Table 2.3: Impacts of variation orders (Hanna et al., 2002)

S. N Impacts of Variation Orders

1 Increase in project cost 2 Progress is affected but without any delay 3 Increase in overhead expenses 4 Delay in payment 5 Quality degradation 6 Productivity degradation 7 Procurement delay 8 Rework and demolition 9 Logistics delays 10 Blemish firm’s reputation 11 Poor safety conditions 12 Poor professional relations 13 Additional payments for contractor 14 Disputes among professionals 15 Completion schedule delay

a. Increase in project cost

Construction projects involve recognized phases of which two are particularly important,

namely the pre-construction and construction phases. The most common impact of variations

during the construction phase is the increase in project cost (CII, 1990). However, all

variation orders do not increase the costs of construction. Omissions in most cases reduce

costs while additions increase costs (Ssegawa et al., 2002). As Ruben (2008) found in his

study variation orders adversely impact costs. In every construction project, a contingency

sum is usually allocated to cater for possible variations in the project, while keeping the

overall project cost intact. Arguably, the more the number of variation orders, the more they

are likely to affect the overall construction delivery cost. In fact, variation orders have both a

direct and indirect effect on cost. Direct costs constitute the additional costs incurred to

perform the activities of the current variation orders. As Bower (2000) identified, the direct

costs associated with variation orders are as follows:

Time and material charges related to immediately affected tasks;

Recalculation of network, increased time-related charges and overheads;

Reworks and standing time;

Timing effects for example winter time;

Inflation, change to cash flow and loss of earnings; and



Management time, head office and site charges.

Bower (2000) also pointed out that indirect costs are costs incurred as a result of variation

orders, whether they are apparently linked to them or not. These include:

Loss of productivity due to interruption where the gang has to familiarize with new

working condition, tools and material;

Rework and making good on affected trades other than the actual variation order

Change in cash flow due to effect on inflation and financial charges;

Cost for redesign and administration of the variation order; and

Litigation-related costs in case disputes arise due to the variation order.

b. Progress is affected

Project progress may be impacted by variations (Assaf et al., 1995). During execution of the

project, time has an equivalent monetary value even if the professional team tries its best to

keep the project completion schedule intact. However, only major variations during the

project may affect the project completion time according to Arain and Pheng (2005). This

means the contractor would usually try to accommodate the variations by utilizing the free

floats in the construction schedules. Hence, the variations affect the progress but without any

delay in the project completion if the free floats are utilized.

c. Increase in overhead expenses

Variations need to go through a few stages of processing procedures as mentioned earlier and

require to be evaluated before they can even be implemented (O’Brien, 1998). The process

and implementation of variations in construction projects would increase the overhead

expenses for all the participants concerned. Normally these overhead charges are provided for

from the contingency fund allocated for the construction project.

d. Delay in payment

Delay in payment occurred frequently due to variations in construction projects (CII, 1990).

Variations may hinder the project progress, leading to delays in achieving the targeted

milestones during construction (CII, 1995). Eventually, this may affect payment to the

contractors. Occasionally this delay may cause severe problems that end up in delays in



payment to the subcontractors; this is because main contractors may not be able to pay the

subcontractors unless they get paid by the owner first.

e. Quality degradation

Variations, if frequent, may impact the quality of work adversely (Fisk, 1997). Contracts with

a significant degree of risk for unknown variables such for example, lump sum, contractors may

cut corners on quality and quantity to maximize profits. According to CII (1995), the quality of

work was usually poor because of frequent variations since contractors tended to compensate

for the losses.

f. Productivity degradation

Interruption, delays and redirection of work that are associated with variation orders have a

negative impact on labour productivity. These in turn can be translated into labour cost or

monetary value (Ibbs, 1997b). Hester et al. (1991) argued that the productivity of workers

was expected to be greatly affected in cases where they were required to work overtime for

prolonged periods to compensate for schedule delays. Thomas and Napolitan (1995)

concluded that variations normally led to disruptions and these disruptions were responsible

for labour productivity degradation. The most significant types of disruptions were due to the

lack of materials and information as well as the work out of sequence. Lack of material was

reported as the most serious disruption. Hence, to manage variation, one needed to manage

these disruptions. However, the disruptive effects could not be avoided in many instances.

g. Procurement delay

Variations which are imposed when construction is underway may require revised

procurement requests (O’Brien, 1998). Procurement delays can be frequent due to variations

that require new materials and specialized equipment. Hester et al. (1991) observed that

procurement delays were common effects of variations related to new resources for

construction projects.

h. Rework and demolition

Rework and demolition are frequent occurrences due to variations in construction projects

(Clough and Sears, 1994). Variations which are imposed when construction is underway or

even completed, usually lead to reworks and delays in project completion (CII, 1990a).



Rework and demolition are potential effects of variations in construction, depending on the

timing of the occurrence of the variations. These effects are to be expected due to variations

during the construction phase. This is because the variations during the design phase do not

require any rework or demolition on construction sites.

i. Logistics delays

Logistics delays may occur due to variations requiring new materials and equipment (Fisk,

1997). Hester et al. (1991) observed that logistics delays were significant effects of variations

in construction projects. Logistics delays were experienced in construction projects where

variations in the construction phase required new materials, tools and equipments.

j. Blemish firm’s reputation

Variations are referred to as a major source of construction claims and disputes (Fisk, 1997;

Kumaraswamy et al., 1998). The claims and disputes may affect the firm’s reputation

adversely, leading to insolvency in severe cases. Variations also increase the possibility of

professional disputes. Conventionally, variations present problems to all the parties involved

in the construction process.

k. Poor safety conditions

Variations may impact the safety conditions in construction projects (O’Brien, 1998; Arain et

al., 2004). This is because change in construction methods, materials and equipment may

require additional health and safety measures (Arain & Pheng, 2005).

l. Poor professional relations

Construction changes are a major source of construction dispute (Fisk, 1997). Eventually,

variations may impact professional relations, leading to disputes.

Clear procedures that are presented in the contract and fair allocation of risks can help in

resolving disputes through negotiation rather than litigation (CII, 1995).

m. Additional payments for contractor

Additional payments for the contractor can be an impact of variations in construction

projects. Variations are considered to be a common source of additional works for the



contractor (O’Brien, 1998). Due to additional payments, the contractor looks forward to

variations in the project.

n. Disputes among professionals

Like poor professional relations, disputes among professionals are also impacts of frequent

variations in construction projects. The disputes over variation orders and claims are

inevitable and the variation clauses are often the source of project disputes (CII, 1995). Clear

procedures presented in the contract and fair allocation of risks can help in resolving disputes

through negotiation rather than litigation (CII, 1995). Frequent communication and strong

coordination can assist in eliminating the disputes between professionals.

o. Completion schedule delay

Clients require their construction projects to be completed within minimum time limits. It is

anticipated that projects finished within the shortest possible time achieve some monetary

savings. Completion schedule delay is a frequent result of variations in construction projects

(Ibbs, 1997). According to Koushki (2005) variation orders issued during various phases of

construction projects impacted both the completion time and costs of projects. Hanna et al.

(2002) stated that as the number of variation orders increases the more significant

productivity losses become. Productivity is the amount of output over a unit of time.

Therefore, loss in productivity implies loss of time and subsequent delays.

2.9 Recommended Strategies to Minimize Variation Orders

The potential impact of variation orders can be minimized if possible strategies are clearly

suggested. As Arain (2005) suggested, variations can be reduced with due diligence during

the design stages. Furthermore, it would assist professionals in taking proactive measures for

reducing variation orders for building projects if strategies are suggested. In order to

minimize variation orders control system should be established for the ultimate benefit of

owners. Baharuddin (2005) concluded variation orders can be minimized if all the parties

involved in projects are aware that preliminary work before tendering must be carried out, for

example detailed site and soil investigations. While design errors and omissions cannot be

completely avoided, they can be reduced especially if designers assessed their workloads

before committing themselves to new contracts (Ruben, 2008). In another way, the designers

should ensure enough time and experienced human resources to deliver a sound design within



the proposed time frames. Ruben (2008) identified recommendations to reduce the

occurrence of variation orders. Among other recommendations, Baharuddin (2005) identified

the following recommended strategies and suggestions to reduce the occurrences of variation

orders. Many studies were conducted to find out possible strategies to minimize variation

orders.

List of strategies that suggested by different researchers are identified as follows (Bower,

2000; Baharuddin, 2005; Chan and Yeong, 1995; Arain, 2005; Ruben, 2008; Bin-Ali, 2008;

Willis, 1980; Ming et al., 2004; Levy, 2006; Al-Hakim, 2005a; Sweeney, 1998; Formoso,

1999). These are:

Adequate planning is required by all involved parties before works start on site;

The consultant should produce a concluding design and contract;

Drawings should be complete at tender stage;

Adequate time should be spent on pre-tender planning phase;

Clients should provide a clear brief of the scope of works;

All parties should forecast to overview unforeseen situations;

Closer consultant co-ordination is required at design stage;

Enhance communication and all parties should be proactive all times;

Works should be supervised with an experienced and dedicated supervisor;

Consultant should ensure that the design/specifications fall within the approved

budget and the budget team should participate during the design phase;

Get accurate information and research with regard to procurement procedure,

material and plant;

Carry out detail site investigation including detail soil investigations and consider it

during tendering stage;

Have the underground cable route confirm by the local authorities;

Have the land application or land purchase completed before awarding contracts;

Once the tender is awarded, there should be no changes to the specifications; and

Place experienced and knowledgeable executives in the engineering and design

department.



2.10 Variable Identification

This chapter reviewed literatures on variation orders and their impacts on building projects.

Based on their nature two types of variation orders are identified namely beneficial variation

orders that lead to value improvement; and detrimental variation orders that lead to value

degradation. Based on their bases like time, need and effect, different types of variation

orders were identified namely anticipated or emergent, proactive or reactive, or pre-fixity or

post-fixity, elective or required, discretionary or nondiscretionary, or preferential or

regulatory, beneficial, neutral or disruptive. Based on the objectives of the study, the causes

of variation orders and their impacts on building projects as well as recommended strategies

to minimize them were identified from the literatures to be used in the research instrument.

From the literatures, the following causes of variation orders were identified:

Change of plans or scope

Change of schedule

Change in specifications

Change in design

Errors and omissions in design

Inadequate working drawing

details

Non-compliant design with

government regulations

Impediment in prompt decision

making process

Unforeseen problems

Replacement of materials or

procedures

Inadequate shop drawing details

Lack of judgment and

experience

Financial problems

Inadequate scope of work for

one or more parties to the

contract

Design complexity

Lack of communication

Defective workmanship

Design discrepancies

Inadequate project objectives

Long lead procurement

Lack of coordination

Fast track construction

Ambiguous design details

Unavailability of skills

Weather conditions

Lack of strategic planning

Lack of knowledge of available

materials and equipment

Lack of involvement in design

of one or more parties to the

contract



Non-compliant design with

owner's requirement

Health and safety considerations

Lack of a specialized

construction management

Obstinate nature of one or more

of the parties to the contract

Differing site conditions

Poor procurement process

Conflicts between contract

documents

Value engineering

Change in economic conditions

Honest wrong beliefs of one or

more parties to the contract

Lack of required data

Unavailability of equipment

Unfamiliarity with or

unawareness of local conditions

Socio-cultural factors

Change in government

regulations

Speculation on desired

profitability

Technology change

The frequent occurrence of variation orders can impact building projects for example, by

contributing to cost overruns. If not carefully managed, a variation order may give rise to

disputes between parties to the contract. From the literatures a list of impact of variation

orders were identified. These are:

Increase in project cost

Progress is affected

Increase in overhead expenses

Delay in payment

Quality degradation

Productivity degradation

Procurement delay

Rework and demolition

Logistics delays

Blemish firm’s reputation

Poor safety conditions

Poor professional relations

Additional payments for contractor

Disputes among professionals

Completion schedule delay



Due to the nature of works, variations are unavoidable in construction projects. But their

occurrence can be minimized if clear strategies are set. Recommended strategies to minimize

variation orders were developed from the literatures to minimize variation orders. These are:

Plan adequately before works start on site;

Produce a concluding design and contract documents;

Complete the drawings at tender stage;

Spend adequate time on pre-tender planning phase;

Provide a clear brief of the scope of works;

Forecast to overview unforeseen situations;

Coordinate closely at design stage;

Enhance communication between all parties;

Supervise works with an experienced and dedicated supervisor;

Ensure that the design/specifications fall within the approved budget;

Get information with regard to procurement procedure, material and plant;

Carry out detail site investigation including detail soil investigations;

Have the underground cable route confirm by the local authorities;

Have the land application or land purchase completed before awarding contracts;

Once the tender is awarded, make no changes to the specifications; and

Place experienced and knowledgeable executives in the design department.



CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents the methodology adopted and identifies the tools and techniques

employed in conducting this study. The methodology describes the practical way in which the

whole research project has been organized (Oliver, 2004). Methodology is a plan of action

that shows how the problems will be investigated, what information will be collected using

which methods, and how this information will be analyzed in order to arrive at conclusions

and develop recommendations. Research follows some steps and procedures when conducted.

Once the problem statement has been formulated, it should become evident what kind of data

will be required to study the problem, and also what kind of analysis would be most

appropriate to analyze the data (Walliman, 2005). The problem investigated in this study is

the impact of variation orders on public building projects in Addis Ababa. It is anticipated

that the identification of the causes of variation orders may lead to their reduction, possible

elimination and improvement in overall performance of public building projects.

3.2 The Study Approach

The methods of data collection impact the analyses, the results, conclusions, values and

validity of the study at the end. From the theoretical point of view, qualitative approach

seeks to gain insights and understanding people's perceptions of the world. This research can

be both qualitative and quantitative. It is qualitative, because the study focused to obtain the

perceptions of public building construction stakeholders relative to the impact of variation

orders. Desk studies were conducted on specific public building projects in Addis Ababa. The

desk studies on the selected sites involved the observation of site documents project

participants’ opinion and the exploration of the physical works.

The study is also quantitative, because it focused on measurements (such as: high and low,

often and seldom, similar and different) of the variables that identified from the literatures to

get answers for the formulated questions.

In order to improve the validity of the findings of this research, the triangulation approach

was adopted between the desk study, survey and the literatures. This approach consists of

combinations of qualitative and quantitative methods strengthened with the literature review.



3.3 Population and Sampling

Due to the nature of data to be collected from the desk study and the expected participants for

survey study, a non-probability sampling was preferred to be used. A purposive sampling

method was adopted to select the population for the study.

In this study first a population of twenty eight (28) (See Appendix B) G+3 and above with

and without basement public building projects, which were under construction in Addis

Ababa from the commencement of work from July 2010 to the end of June 2012 G.C with

more than 60% completed projects from different sectors were selected. The projects selected

limiting their progress, work schedules and building height. All the twenty eight projects will

be used in the study. The other populations were the stakeholders in the Addis Ababa city

government public building projects namely clients (project owners), contractors and

consultants to which the questionnaires were sent. These populations were selected

depending on their direct exposure to the selected twenty eight public building project

activities.

3.4 Data Collection

For a better understanding on the applicability of the various mechanisms used in assessing

the impact of variation orders, data was collected using desk study and survey.

3.4.1 Desk Study

In order to have information on the stated problem, data was extracted from the project

payment certificates and monthly progress reports. This helps to understand the relationship

between the theories and actual practices in building projects. The data collected through the

desk study was determined the worthiness of the topic for research.

3.4.2 Survey

3.4.2.1 Interviews

The interview was conducted face-to-face with the interviewee asking questions selected

individuals. The interview is a useful technique for collecting data which would probably not

be accessible using techniques such as observations and questionnaires. Semi-structured

interview were conducted with senior project supervision and follow up team leader, a senior

contract administrator, and a senior project manager to gather information on causes and



impacts of variation orders on public building projects as well as to look for

recommendations if any to minimize them.

3.4.2.2 Questionnaire

Questionnaire is the simplest and time saving method to collect data effectively from a huge

number of respondents. Formulating questions from the identified variables, the questionnaire

was designed to gather data from professionals that were involved in public building projects

in Addis Ababa. Closed-ended questions were formulated by allowing them to add other

variables from their experience at the end of each section (See Appendix A). The

respondents were asked to rate the questions on the five-point scale of ordinal measures as

shown in Figure 3.1 below. The questionnaire was structured in four sections as follows:

Section A: The category of organization in which the respondent serves, his/her role in the

organization, and the respondent’s working experience. Basically there were four questions in

this section.

Section B: To obtain responses from respondents on the causes of variation orders on public

building projects. The ranking of the responses was by using Likert’s scale of five ordinal

measures which arranged in ascending order from 1 to 5. This section included a total of 38

required responses.

Section C: To get responses from the respondents on the impact of variation orders on public

building projects. The responses were ranked by using Likert’s scale of five ordinal measures

which arranged in ascending order from 1 to 5. A total of 15 required responses were

included under this section.

Section D: To obtain responses from the respondents on the recommended strategies to

minimize variation orders on public building projects. The responses were ranked by using

Likert’s scale of five ordinal measures which are arranged in ascending order from 1 to 5.

This section included a total of 15 required responses.

Ordinal scale of 1 to 5

1 2 3 4 5 Increasing degree of contribution from 1 to 5

Figure 3.1: Five ordinal measures of agreement by Likert Scale



The questionnaires were hand-delivered to the respondents at their head offices and at project

sites. The responses were received also by the same means. However, a face-to face delivery

was preferred to motivate the respondents to participate and thereby improving the response

rate for the study.

3.5 Method of Data Analysis

The responses to the questionnaire was based on Likert’s scale of five ordinal measures

which was from one 1 to five 5 arranged in ascending order according to the degree of

contribution to each question.

The main approach used to analyze the data was by using the Relative Index (RI) technique.

The responses are analyzed using the Microsoft Excel software package. The analysis

included ranking the factors in terms of degree of effecting. In the computation of the relative

index the following formula was used;

RI = (5n5 + 4n4 + 3n3 + 2n2 + n) ……… Equation 3.1 5 (n5 + n4 + n3 + n2 + n)

Where:

RI: Relative Index

n5, n4, n3, … : number of responding indices.

The Spearman (rho) rank correlation coefficient is used for measuring the differences in

ranking between two groups of respondents scoring for various factors (i.e. clients versus

consultants, clients versus contractors, and consultants versus contractors).

The Spearman (rho) rank correlation coefficient for any two groups of ranking is given by the

following formula:

Rho (cal) = 1 – 6 x (∑di2) .….….. Equation 3.2

N x (N2 –1)



Where:

Rho (cal): Spearman's rank correlation coefficient;

di: the difference in ranking between each pair of factors; and

N: number of factors (variables).

The value of the Spearman (rho) rank correlation coefficient varies between -1 and +1. A

correlation coefficient of +1 implies perfect positive correlation, 0 implies no correlation and

-1 implies perfect negative correlation.



CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION

4.1 Introduction

This chapter analyses the data collected using questionnaires, desk study and interviews. The

method used is discussed in Chapter 3. The collected data from the questionnaires were

tabulated and analyzed according to their ranking on Relative Index (RI). Interviews from

selected respondents are presented, together with observations from desk study. The objective

of this chapter is to identify the highest ranked factors for discussion and to find correlation

with findings from the interviews and desk study.

4.2 Analysis of Data from the Desk Study

During the study period, there were a total of thirty-eight (38) public building projects which

were under execution in Addis Ababa and twenty-eight (28) project samples are taken for the

study. From this number five (5) completed projects in which variation orders (VO) approved

were selected for desk study in order to fully understand the causes and impacts of variation

orders and to determine what recommendations or strategies could be taken to minimize

variation orders on public building projects. These projects were 100% completed and

selected as a representative to the occurrences of variation orders of each of the public

building projects. The list of selected projects is as shown in Table 4.1.

Table 4.1: List of selected building projects

Project Code

Project Name Contract Amount (Birr)

V.O (Birr)

Percent of V.O (%)

Project A Sport Commission 51,931,227.89 8,284,485.09 15.95

Project B Education Bureau 60,343,438.45 4,091,699.06 6.78

Project C Police Commission 99,444,398.79 8,152,255.70 8.20

Project D Credit & Savings Institution 36,914,578.87 7,234,368.3 19.60

Project E Fire and Emergency Service 58,076,253.18 5,150,610.80 8.87

(Source: Addis Ababa Housing Development & Construction Bureau (2012))



4.2.1 Project A

The tender sum for Project A was 51,931,227.89Birr and the original planned works duration

was 540 days. There were numerous additional works associated with design changes due to

owner’s requirement. During the observation of the project it was observed that additional

partition walls were provided between the rooms. Items were missed on contract document

for sanitary and electrical works. Due to these changes a variation of 8,284,485.09Birr was

ordered. As the contractor could not finish on agreed time, the extension of time of 255 days

was granted which was a time overrun of 47.22% over the schedule of works. No penalties

were levied against the contractor.

4.2.2 Project B

Project B was awarded with a tender sum of 60,343,438.45Birr and the original planned works

duration was 720 days. The project was exposed to variation due to design changes for the

error made by the consultant. It was observed that civil site works were redesigned which

incurred an extra cost. Items were missed on contract document for sanitary and electrical

works. Due to these changes a variation of 4,091,699.06Birr was ordered. Due to lack of

communication between the client and the consultant, dispute occurred between the client

and consultant. Then the payment is delayed and the contractor was granted an extension

time of 300 days which was a time overrun of 41.67% over the planned works duration.

4.2.3 Project C

The tender sum for Project C was 99,444,398.79Birr and the original planned works duration

was 800 days. The project was exposed to variation order of 8,152,255.70Birr due to missed

items on contract document, design modifications on civil site works, and design changes for

roofing works. Modification of the civil site works took about five months to make decisions

and submit the modified documents to the contractor. Due to this lack of decision making

process by the client, the contractor was granted an extension time of 285 days which was a

time overrun of 35.63% over the schedule of works.

4.2.4 Project D

Project D was awarded with a tender sum of 36,914,578.87Birr and the original planned

works duration was 600 days. The project was exposed to variation order of 7,234,368.30Birr



due to additional works on civil site, missed items on contract document and design

modifications on door and window works which caused by design errors made by the

consultant. The client ordered the contractor to execute the additional works, the missed

items and the works to be modified. Due to lack of decision making process, the client did

not submit the modified deign at the right time to the contractor. The interim payment to the

contractor is also delayed due to the additional works which totally affected payment for the

other activities. Due to this reason the project was delayed which caused by the client and the

contractor was granted an extension time of 245 days which was a time overrun of 40.83%

over the schedule of works.

4.2.5 Project E

The tender sum for Project E was 58,076,253.18Birr and the original planned works duration

was 540 days. A variation of 5,150,610.80Birr was ordered due to missed items on contract

document. The client did not approve the variation at their earliest with the right decision.

The contractor was granted an extension of time of 285 days which was a time overrun of

52.78% over the planned works duration. The client's records were silent relative to the

reason for such an extension except the missed items on the contract document.

Table 4.2: Summary of causes and impact of variation orders data from the desk study

Project Causes of V.O Impact of V.O

Project A Design changes Incomplete contract document

Increase in project cost Completion schedule delay

Project B Modification of design Incomplete contract document and

drawings Lack of communication between parties

Increase in project cost Completion schedule delay Disputes among the parties Payment delay to the contractor

Project C Design changes Incomplete contract document Modification of design Lack of decision making by the client


Project D Additional works Incomplete contract document Modification of design

Increase in project cost Completion schedule delay Payment delay to the contractor

Project E Incomplete contract document Lack of decision making by the client




4.2.6 Findings from the Desk Study

The desk study was applied to five selected documents of public building projects contract

documents. The contract documents were massive with data, information, contract, bill of

quantities and drawings. The studied documents were signed, stamped and legal documents at

law.

4.2.6.1 Causes of Variation Orders

The desk study findings showed that fourteen (14) causes of variation orders in answering the

first objective. Due to the repetition, it was further syntheses to eight (8) from the most to the

least repetitive causes of variation orders to be used in questionnaire for the verification and

validation process to evaluate their degree of important. But all the eight causes were already

the domain of the variables which identified from the literatures review. Below is the

document study finding of summary of causes of variation orders from the five projects

contract documents as shown in Table 4.3.

Table 4.3: Causes of variation orders from the desk study

S.N Causes of Variation Orders 1 Design changes 2 Incomplete contract documents 3 Incomplete working drawings 4 Errors in design by the consultant 5 Design modification 6 Non-compliant design with owner’s requirement 7 Lack of communication between the parties 8 Lack of decision making process by the client

4.2.6.2 Impact of Variation Orders

From the document study findings, the following are summary of the impacts of variation

orders shown in Table 4.4. Thirteen (13) impacts were identified in answering the second

objective. And these variables were further syntheses to four (4) in ascending order of their

prepetition which were be used in the questionnaire for the verification and validation process

to evaluate their degree of important. But all the variables were in the literatures review.



Table 4.4: Impacts of variation from the desk study

S.N Impacts of Variation Orders

1 Increase in project cost 2 Completion schedule delay 3 Payment delay to the contractor 4 Disputes among the involved parties

4.3 Interviews

4.3.1 Analysis of Data from the Interview

These interviews were made between selected construction industry practitioners who are

currently involved in public building projects focusing on their perceptions on variations

orders. In total three interviews were conducted, namely with a senior project supervision and

follow up team leader (A) from the clients’ group, a senior contract administrator (B) from

the consultants’, and a senior project manager (C) from the contractors’ group as shown in

Table 4.5 below. The interview aimed at discovering the causes of variation orders and their

impacts on public building projects and to seek recommendations to minimize their

occurrence.



Table 4.5: Interview results Questions Interviewee A Interviewee B Interviewee C

From

you

r exp

erie

nce,

wha

t are

the

caus

es o

f var

iatio

n or

ders

on

publ

ic

build

ing

proj

ects

?

Incomplete BoQ

Design changes and

modification

Errors in design

Change in

specifications

Lack of

communication

between parties

Design Changes

Change in

specification

Incomplete BoQ

Unforeseen conditions

on site

Lack of coordination

Discrepancy between

drawing and BoQ

Non-compliant design

with client’s

requirement

Lack of experience

Errors in design

Design complexity

Lack of judgment

Wha

t are

the

vario

us im

pact

s of

var

iatio

n or

ders

on

publ

ic

build

ing

proj

ects

?

Increase in project

cost

Completion

schedule delay

Degrades quality

Disputes among the

professionals

Increase in project cost

Completion schedule

delay

Rework and

demolition

Increase in contract and

over head costs

Disputes among parties

Completion schedule

delay

Wha

t do

you

sugg

est t

o m

inim

ize

the

varia

tion

orde

rs o

n pu

blic

bui

ldin

g pr

ojec

ts?

Produce a complete

design and contract

document

Prepare a completed

detail drawings

There should be

communication

between parties

Designs should be

complete at tender

stage

Carry out detail site

investigation before

tendering stage

Forecast unforeseen

situations before

tendering

Prepare a complete

drawing and contract

document before

tendering stage

Completed detail

drawings should be

submitted on time

Works should be

supervised with

experienced supervisors



4.3.2 Findings from the Interview

From the interview sixteen (16) causes of variation orders in answering the first question, ten

(10) impacts of variation orders for the second question and nine (9) strategies to minimize

variation orders in answering the third question were identified. These variables were merged

and checked if they were out of the literatures in order to include them in the questionnaire.

But more of them with the same meaning were the domain of the variables identified from

the literatures.

The findings from the interview revealed that incomplete contract document, design changes,

change in specifications, errors in design, unforeseen conditions, design complexity, lack of

communication and coordination between the parties, lack of experience and of judgment

were the causes which contribute to the occurrence of variation orders.

As identified from the interview, the impacts of variation orders which frequently occur on

public building projects were increase in project cost, most of the time which termed as cost

overrun, completion schedule delay termed as time overrun, disputes among the parties, it

degrades quality and it results in rework and demolition.

The interviewee suggested that it is possible to minimize the occurrence variation orders with

the most common strategies which always pointed out by experienced construction

practitioners. According to the interviewee, a complete design and contract documents should

be produced, complete detail drawings should be submitted on time, a detail site investigation

should be carried out and unforeseen conditions should be forecasted before the tendering

stage and supervising the works with experienced supervisors can minimize variation orders

on public building projects.

4.4 Analysis of Data from the Questionnaires

4.4.1 Rate of Response

The respondents were grouped into three major groups namely client, consultant and

contractor. The returns from the three groups are tabulated in Table 4.6 below which shows

an average response rate. Out of 45 targeted responses, only 32 (71%) of them completed and

returned the questionnaire. Thirty one questionnaires from 9 clients, 4 consultants and 19

contractors were received.



Table 4.6: Questionnaire return rate

Group Number of

Questionnaires distributed

Number of Questionnaires

Returned

Response Rate (%)

Client 12 9 75 Consultant 5 4 80 Contractor 28 19 68 Total 45 32 71

4.4.2 Respondents’ Background

Among the nine responses received from clients, seven (78%) of them were construction

supervisors and follow-up engineers while two (22%) were contract administrators.

Among the four responses received from consultants, three (75%) of them were resident

engineers and one (25%) was contract administrator. And among the nineteen responses

received from contractors, eight (42%) of them were project managers, eight (42%) of them

were office engineers, three (16%) were quantity surveyors. Figure 4.1 below shows the

composition of respondents by their position in their organization.

Figure 4.1: Position of respondents



4.4.3 Respondents’ Experience

All the respondents have different levels of work experience in building projects. Proportions of

the respondents in terms of number of years of involvement in building projects are tabulated in

Table 4.7. It was observed that the majority of the respondents from the clients have between five

to ten years of experience. Majority of the respondents from the consultants have also between

five to ten years of experience. And about one half of the respondents from the contractors have

less than five years of experience.

Table 4.7: Respondents’ experience

Experience in

Building Projects Client Consultant Contractor Total

Less than 5 years 3 1 12 16

5 to 10 years 4 2 3 9

10 years and above 2 1 4 7

4.4.4 Findings from the Questionnaires

In the structured part of the questionnaire, the respondents were asked to rate the degree of

contribution of the variables drawn from the literature review. Furthermore, the respondents

were also asked to add other variables or factors that contributed to the causes and impacts as

well as recommendations that they perceived as being necessary. The responses were

analyzed using the Microsoft Excel software package.

From the forty five (45) causes of variation identified from the literatures, only thirty-eight

(38) mutually exclusive causes of variation orders, fifteen (15) impacts of variation orders

and fifteen (15) strategies to minimize variation orders on building projects were used in

questionnaire survey. All the impacts of variation orders and the suggested strategies to

minimize them were used as identified from the literatures. The analysis was divided in to

three groups the clients’ point of view, the consultants’ point of view and the contractors’

point of view and a correlation test was done between the groups. A ranking system using the

Relative Index (RI) method was calculated to find the most significant factor for each section.

The value of RI ranges from 0.2 to 1. The value 0.2 represents the lowest strength and the

value 1 representing the maximum strength.



4.4.4.1 Causes of Variation Orders on Public Building Projects

The frequency of the causes of variation orders were identified by using a 5 point Likert

scale, namely Never = 1; Seldom = 2; Sometimes = 3, Often = 4; and Always = 5. The causes

of variation orders were ranked by comparing their relative index.

I. Clients Group

From Table 4.8 below, it was possible to rank the causes of variation orders by comparing

their RI. According to the clients, impediment in prompt decision making process, change in

design by the consultant, errors and omissions in design, inadequate working drawing details,

and unforeseen problems were the most ranking causes of variation which dominate with

equal value (RI=0.667) followed by change in specifications, conflicts between contract

documents, and design discrepancies (RI=0.644). And health and safety consideration was

the least ranked cause of variation orders.



Table 4.8: Frequency of causes of variation orders from the clients group

Causes of Variation Orders RI of Client

Ranking

Impediment in prompt decision making process 0.667 1 Change in design by the consultant 0.667 2 Errors and omissions in design 0.667 3 Inadequate working drawing details 0.667 4 Unforeseen problems 0.667 5 Change in specifications 0.644 6 Conflicts between contract documents 0.644 7 Design discrepancies 0.644 8 Unavailability of skills 0.622 9 Contractor's desired profitability 0.622 10 Non-compliant design with owner's requirement 0.600 11 Lack of strategic planning 0.600 12 Change of schedule 0.578 13 Lack of coordination 0.578 14 Lack of consultant's knowledge of available materials and equipment 0.578

15

Lack of contractor's involvement in design 0.578 16 Poor procurement process 0.578 17 Consultant's lack of judgment and experience 0.556 18 Change of plans or scope 0.533 19 Technology change 0.533 20 Design complexity 0.533 21 Consultant's lack of required data 0.533 22 Honest wrong beliefs of contractor 0.533 23 Differing site conditions 0.511 24 Defective workmanship 0.511 25 Unfamiliarity with local conditions 0.511 26 Contractor's lack of required data 0.511 27 Non-compliant design with government regulations 0.489 28 Lack of communication 0.489 29 Inadequate project objectives 0.467 30 Lack of a specialized construction manager 0.467 31 Change in government regulations 0.467 32 Change in economic conditions 0.444 33 Fast track construction 0.422 34 Weather conditions 0.422 35 Honest wrong beliefs of consultant 0.400 36 Socio-cultural factors 0.400 37 Health and safety considerations 0.378 38



II. Consultants Group

As shown in Table 4.9, respondents of this group equally believed that change in economic

conditions and unforeseen problems were the most ranking causes of variation orders

(RI=0.800). Change of plans, change in specifications, and poor procurement process

followed with equal value (RI=0.750) and then change of schedule (RI=0.700). According to

the respondents of this category the least ranked cause of variation orders was honest wrong

beliefs of consultant.

Table 4.9: Frequency of causes of variation orders from the consultants group

Causes of Variation Orders RI of

Consultant Ranking

Change in economic conditions 0.800 1 Unforeseen problems 0.800 2 Change of plans or scope 0.750 3 Change in specifications 0.750 4 Poor procurement process 0.750 5 Change of schedule 0.700 6 Design discrepancies 0.700 7 Lack of contractor's involvement in design 0.700 8 Lack of communication 0.700 9 Honest wrong beliefs of contractor 0.700 10 Lack of strategic planning 0.700 11 Change in design by the consultant 0.650 12 Errors and omissions in design 0.650 13 Contractor's desired profitability 0.650 14 Differing site conditions 0.650 15 Unfamiliarity with local conditions 0.650 16 Contractor's lack of required data 0.650 17 Impediment in prompt decision making process 0.600 18 Design complexity 0.600 19 Unavailability of skills 0.600 20 Lack of a specialized construction manager 0.600 21 Weather conditions 0.600 22 Health and safety considerations 0.600 23 Inadequate project objectives 0.550 24 Conflicts between contract documents 0.550 25 Inadequate working drawing details 0.550 26 Consultant's lack of judgment and experience 0.550 27 Non-compliant design with government regulations 0.550 28 Non-compliant design with owner's requirement 0.550 29 Defective workmanship 0.550 30 Fast track construction 0.550 31 Socio-cultural factors 0.550 32 Technology change 0.500 33 Lack of coordination 0.500 34 Consultant's lack of required data 0.500 35 Change in government regulations 0.500 36 Lack of consultant's knowledge of available materials 0.450 37 Honest wrong beliefs of consultant 0.400 38



III. Contractors Group

From Table: 4.10 below, the most cause of variation according to these respondents lack of

communication (RI=0.726). The second ranked cause was inadequate working drawing

details (RI=0.695), followed by impediment in prompt decision making process and poor

procurement process (RI=0.684) and then change in design by the consultant (RI=0.674).

Health and safety consideration was the least ranked cause of variation orders.

Table 4.10: Frequency of causes of variation orders from the contractors group

Causes of Variation Orders RI of

Contractor Ranking

Lack of communication 0.726 1 Inadequate working drawing details 0.695 2 Impediment in prompt decision making process 0.684 3 Poor procurement process 0.684 4 Change in design by the consultant 0.674 5 Change of plans or scope 0.663 6 Lack of contractor's involvement in design 0.663 7 Contractor's desired profitability 0.663 8 Change in specifications 0.653 9 Errors and omissions in design 0.653 10 Contractor's lack of required data 0.653 11 Change of schedule 0.642 12 Consultant's lack of judgment and experience 0.642 13 Lack of consultant's knowledge of available materials 0.642 14 Consultant's lack of required data 0.642 15 Design discrepancies 0.642 16 Lack of a specialized construction manager 0.642 17 Lack of strategic planning 0.632 18 Unforeseen problems 0.621 19 Lack of coordination 0.611 20 Differing site conditions 0.600 21 Defective workmanship 0.600 22 Unfamiliarity with local conditions 0.600 23 Conflicts between contract documents 0.589 24 Change in economic conditions 0.579 25 Design complexity 0.568 26 Non-compliant design with owner's requirement 0.568 27 Honest wrong beliefs of contractor 0.547 28 Unavailability of skills 0.537 29 Weather conditions 0.526 30 Technology change 0.516 31 Honest wrong beliefs of consultant 0.516 32 Non-compliant design with government regulations 0.516 33 Inadequate project objectives 0.495 34 Socio-cultural factors 0.484 35 Fast track construction 0.474 36 Change in government regulations 0.442 37 Health and safety considerations 0.411 38



The spearman correlation coefficient is calculated using Equation 3.2 and tabulated as

shown below in Table 4.11.

Table 4.11: Summary of correlation test on the ranking of causes of variation orders

Respondents Rho(cal) = 1 – 6x(∑di2)

N x (N2 –1)

Relation of the respondents

Client Vs Consultant 0.999 strong

Consultant Vs Contractor 1.000 strong

Client Vs Contractor 1.000 strong

From the correlation table above, it can be concluded that there is a strong correlation

between the attitudes of the respondents in all the three groups. This means that most of the

respondents have the same perception about the causes of variation orders.

IV. Overall Responses

As sown in Table: 4.12 below, it was possible to rank the causes of variation orders

combining the responses of all respondents. The most raked causes of variation orders by all

respondents were impediment in prompt decision making process, change in design by the

consultant, and inadequate working drawing details dominate with the same value

(RI=0.669). Change in specifications and poor procurement process came next with equal

value (RI=0.663). Errors and omissions in design, lack of communication and unforeseen

problems followed with the same value (RI=0.656) and then design discrepancies and

contractor's desired profitability (RI=0.650). Change in government regulations (RI=0.456)

and health and safety considerations (RI=0.425) were the least ranked causes of variation

orders.



Table 4.12: Overall frequency of causes of variation orders

Causes of Variation Orders Overall RI Ranking

Impediment in prompt decision making process 0.669 1 Change in design by the consultant 0.669 2 Inadequate working drawing details 0.669 3 Change in specifications 0.663 4 Poor procurement process 0.663 5 Errors and omissions in design 0.656 6 Lack of communication 0.656 7 Unforeseen problems 0.656 8 Design discrepancies 0.650 9 Contractor's desired profitability 0.650 10 Lack of contractor's involvement in design 0.644 11 Change of plans or scope 0.638 12 Change of schedule 0.631 13 Lack of strategic planning 0.631 14 Contractor's lack of required data 0.613 15 Consultant's lack of judgment and experience 0.606 16 Conflicts between contract documents 0.600 17 Lack of consultant's knowledge of available materials 0.600 18 Consultant's lack of required data 0.594 19 Lack of coordination 0.588 20 Lack of a specialized construction manager 0.588 21 Differing site conditions 0.581 22 Unfamiliarity with local conditions 0.581 23 Non-compliant design with owner's requirement 0.575 24 Unavailability of skills 0.569 25 Defective workmanship 0.569 26 Change in economic conditions 0.569 27 Design complexity 0.563 28 Honest wrong beliefs of contractor 0.563 29 Technology change 0.519 30 Non-compliant design with government regulations 0.513 31 Weather conditions 0.506 32 Inadequate project objectives 0.494 33 Honest wrong beliefs of consultant 0.469 34 Fast track construction 0.469 35 Socio-cultural factors 0.469 36 Change in government regulations 0.456 37 Health and safety considerations 0.425 38



4.4.4.2 Impact of Variation Orders on Public Building Projects

The impact of variation orders on building projects was determined using a 5 point Likert

scale, namely No impact = 1; Low impact = 2; Medium impact = 3; High impact = 4; and

Very high impact = 5. The impact of variation orders were ranked by comparing their relative

index.

I. Clients Group

From Table: 4.13 below, the respondents of this group responded that the most impact of

variation order was completion schedule delay (RI=0.822) followed by increase in project

cost (RI=0.778).Additional payments for contractor was the third ranked impact (RI=0.733)

and disputes among the parties was the forth. Fifthly progress is affected according to the

clients followed by delay in payment and logistics delays with equal value (RI = 0.622).

Productivity degradation and blemish firm’s reputation were the least impact of variation

orders on building projects with equal value (RI = 0.422).

Table 4.13: Frequency of impact of variation orders from the clients group

Impact of variation orders RI of Client

Ranking

Completion schedule delay 0.822 1

Increase in project cost 0.778 2

Additional payments for contractor 0.733 3

Disputes among professionals 0.667 4

Progress is affected 0.644 5

Delay in payment 0.622 6

Logistics delays 0.622 7

Increase in overhead expenses 0.600 8

Procurement delay 0.578 9

Rework and demolition 0.556 10

Poor professional relations 0.511 11

Quality degradation 0.489 12

Poor safety conditions 0.444 13

Productivity degradation 0.422 14

Blemish firm’s reputation 0.422 15




As it can be seen Table: 4.14 below, it was possible to rank the impacts of variation orders.

The most raked impacts of variation orders by the consultants were increase in project cost,

delay in payment, and completion schedule delay with equal value (RI=0.850). Progress

affection came next (RI=0.800) and then increase in overhead expenses, rework and

demolition, and logistics delays followed the rank (RI=0.700). Poor safety conditions and

disputes among professionals with equal value (RI=0.600) were the least impacts of variation

orders on public building projects.

Table 4.14: Frequency of impact of variation orders from the consultants group

Impact of variation orders RI of

Consultant

Ranking

Increase in project cost 0.850 1 Delay in payment 0.850 2 Completion schedule delay 0.850 3 Progress is affected 0.800 4 Increase in overhead expenses 0.750 5 Rework and demolition 0.750 6 Logistics delays 0.750 7 Procurement delay 0.700 8 Additional payments for contractor 0.700 9 Quality degradation 0.650 10 Productivity degradation 0.650 11 Blemish firm’s reputation 0.650 12 Poor professional relations 0.650 13 Poor safety conditions 0.600 14 Disputes among professionals 0.600 15


From the following Table 4.15, it was possible to rank the impacts of variation orders by

comparing their RI. According to the contractors, completion schedule delay (RI=0.800) was

the most ranked impact followed by increase in project cost (0.789). Progress affection

(RI=0.768) and additional payments for contractor (RI=0.737) were the next most ranked

impact (RI=0.768) and then increase in overhead expenses (RI=0.716). According to the

contractors, poor safety conditions and poor professional relations were the least ranked

impacts of variation orders with equal value (RI=0.579).



Table 4.15: Frequency of impact of variation orders from the contractors group

Impact of variation orders RI of

Contractor

Ranking

Completion schedule delay 0.800 1

Increase in project cost 0.789 2

Progress is affected 0.768 3

Additional payments for contractor 0.737 4

Increase in overhead expenses 0.716 5

Delay in payment 0.705 6

Procurement delay 0.705 7

Productivity degradation 0.674 8

Logistics delays 0.653 9

Disputes among professionals 0.653 10

Rework and demolition 0.642 11

Blemish firm’s reputation 0.611 12

Quality degradation 0.600 13

Poor safety conditions 0.579 14

Poor professional relations 0.579 15

The spearman’s correlation coefficient is calculated using Equation 3.2 and tabulated as

shown below in Table 4.16.

The summarized spearman correlation coefficient indicates that there is a strong correlation

between all the three groups. This implies that most of the respondents have the same

perception about the impact of variation orders.

Table 4.16: Summary of correlation test on the ranking of impact of variation orders


N x (N2 –1)






As it can be seen in Table: 4.17 below, the most raked impacts of variation orders from the

combined responses of all respondents were completion schedule delay (RI=0.794) followed

by increase in project cost (RI=0.793). Additional payments for contractor (RI=0.742) and

progress affection (RI=0.731) were the next and then increase in overhead expenses



(RI=0.697). Poor safety condition (RI=0.537) were the least ranked impact of variation orders

as responded by all participants.

Table 4.17: Overall frequency of impact of variation orders

Impact of variation orders Overall

RI Ranking

Completion schedule delay 0.794 1 Increase in project cost 0.793 2 Additional payments for contractor 0.742 3 Progress is affected 0.731 4 Increase in overhead expenses 0.697 5 Delay in payment 0.694 6 Procurement delay 0.679 7 Logistics delays 0.667 8 Disputes among professionals 0.661 9 Rework and demolition 0.642 10 Productivity degradation 0.594 11 Blemish firm’s reputation 0.576 12 Quality degradation 0.566 13 Poor professional relations 0.560 14 Poor safety conditions 0.537 15

4.4.4.3 Recommended Strategies to Minimize Variation Orders

The frequency of recommended strategies to minimize variation orders on building projects

was identified using a 5 point Likert scale, namely Unimportant = 1; Less important = 2;

Important = 3; Very important = 4; and Very high important = 5.The impact of variation

orders were ranked by comparing their relative index.

I. Clients Group

From Table 4.18, it was possible to rank the recommended strategies to minimize variation

by comparing their RI. According to the client, the most ranked recommended strategy was

drawings should be complete at tender stage (RI=0.933) followed by carry out detail site

investigation including detail soil investigations and consider it during tendering stage

(RI=0.867). Adequate planning in advance is required by all involved parties before works

start on site come next (RI=0.844). The recommended strategy to have the land application or

land purchase completed and finalized before awarding contracts and once the tender is



awarded, make no changes to the specifications with equal value (RI=0.667) were the least

ranked recommendation to minimize variation orders.

Table 4.18: Frequency of recommended strategies from the clients group

Recommended Strategies to Minimize V.O RI of Client

Ranking

Complete the drawings at tender stage 0.933 1

Carry out detail site investigation including detail soil investigations and consider it during tendering stage 0.867

2

All involved parties should plan adequately before works start on site 0.844

3

The consultant should produce a concluding design and contract documents 0.822

4

Spend adequate time on pre-tender planning phase 0.822 5

The consultant should co-ordinate closely at design stage 0.822 6

Supervise the works with an experienced and dedicated supervisor 0.822

7

Place experienced and knowledgeable executives in the engineering and design department 0.822

8

Consultants should ensure that the design/specifications fall within the approved budget 0.800

9

Clients should provide a clear brief of the scope of works 0.756 10

All parties should forecast unforeseen situations 0.756 11

Enhance communication between all parties 0.756 12

Get accurate information and research with regard to procurement procedure, material and plant 0.733

13

Once the tender is awarded, make no changes to the specifications 0.667

14

Have the land application or land purchase completed before awarding contracts 0.667

15


From Table: 4.19 below, the most ranked recommended strategy to minimize variation

according to respondents of this category is adequate planning in advance is required by all

involved parties before works start on site (RI=1.00). The next recommendations were to

enhance communication between all parties, works should be supervised with an experienced

and dedicated supervisor and carry out detail site investigation including detail soil

investigations and consider it during tendering stage came next with equal value (RI=0.950).



Once the tender is awarded, there should be no changes to the specifications was the least

ranked recommendation to minimize variation orders according to the consultants (0.650).

Table 4.19: Frequency of recommendations from the consultants group

Recommended Strategies to Minimize V.O RI of

Consultant

Ranking All involved parties should plan adequately before works start on site 1.000

1

Enhance communication between all parties 0.950 2 Supervise the works with an experienced and dedicated supervisor 0.950

3


4


5



The consultant co-ordinate closely at design stage 0.900 8


9


10

Clients should provide a clear brief of the scope of works 0.850 11 Get accurate information and research with regard to procurement procedure, material and plant 0.850

12


13

All parties should forecast unforeseen situations 0.750 14 Once the tender is awarded, make no changes to the specifications 0.650

15


As shown in Table: 4.20 below, the most ranked recommendation to minimize variation

according to the contractors was adequate planning in advance is required by all involved

parties before works start on site (RI=0.905) followed by the consultant should produce a

concluding design and contract documents (RI=0.863) and then enhance communication

between all parties (RI=0.842). According to these respondents, once the tender is awarded,

there should be no changes to the specifications (RI=0.621) was the least ranked

recommendation to minimize variation orders.



Table 4.20: Frequency of recommendations from the contractors group

Recommended Strategies to Minimize V.O RI of Contractor

Ranking

All involved parties should plan adequately before works start on site 0.905

1


2

Enhance communication between all parties 0.842 3



5


6


7



9





13


14


15

The spearman’s correlation coefficient is calculated using Equation 3.2 and tabulated as

shown below in Table 4.21. The summarized spearman correlation coefficient indicates that

there is a strong correlation between all the three groups. This means that most of the

respondents have the same perception on the recommended strategies to minimize variation

orders.

Table 4.21: Summary of correlation test on the ranking of recommendations


N x (N2 –1)








From Table: 4.22, it was possible to rank the recommended strategy to minimize variation

orders. The most raked strategy by all respondents were adequate planning in advance is

required by all involved parties before works start on site (RI=0.900) followed by the

consultant should produce a concluding design and contract documents (RI=0.856).

Drawings should be complete at tender stage (RI=0.844) was the next. According to all the

respondents, the least ranked strategy was once the tender is awarded, there should be no

changes to the specifications (RI=0.638).

Table 4.22: Overall frequency of recommendations to minimize variation orders

Recommended Strategies to Minimize V.O Overall

RI

Ranking All involved parties should plan adequately before works start on site 0.900

1


2




5

Enhance communication between all parties 0.831 6 Place experienced and knowledgeable executives in the engineering and design department 0.831

7


8


9



11




14


15



4.6 Discussion of Findings

This section presents the discussion of the study findings from the questionnaires, the desk

study and the interview. The cause of variation orders, impact of variation orders and

recommendations to minimize variation orders are discussed.

4.6.1 Causes of Variation Orders in Public Building Projects

From the questionnaires, the desk study and interview, the common causes of variation orders

on public building projects were design changes and incomplete contract documents, which

resulted from numerous additional works. The causes of variation orders were ranked in

ascending order and the most frequent were identified.

As ranked on questionnaires response previously in Table 4.12 it is clear that the first most

causes of variation orders were impediment in prompt decision making process, change in

design by the consultant, inadequate working drawing details, change in specifications, and

poor procurement process.

The first major cause of variation orders was change in design by the consultant. This could

also be caused due to the client change of mind. Design change is indeed one of the most

causes of variation orders and this fact is supported by the interviewees and the observations

in the desk study. This similarly confirms with the literature review that design change was

one of the major causes of variation orders. As Ming et al. (2004) identified design change

was the major causes of variation orders. The works of Ruben (2008) also listed that design

change was one of the most causes of variation orders.

Incomplete contract document was the second major cause of variation orders. This occurs

due to the client or the consultant work before tendering and it increases the project cost or

schedule. Contract documents of most public projects done by the clients and it could be

difficult to prepare a complete document because they are busy of work.

The third major cause of variation order was impediment in prompt decision making process,

which is due to lack of judgment by the client or the consultant. There is no doubt that lack o

decisions delay the project and causes the contractors to re-design the requirements,

reschedule, their works and material procurement which would have an adverse impact on the

project.



Inadequate working drawing details was the fourth major cause of variation order which is

the out-come of the consultant. A well detailed working drawing is believed to decrease

variation orders. Most professionals argue that a detailed working drawing should be

prepared before the tender stage.

The fifth major cause of variation order was change in specifications which confirms with the

literature review and the interview. In a design stage, it could be a failure to change the

specification due to change of mind of the client or the consultant which results in variation

orders. Consequently change in specifications can be the major cause. As reviewed in the

literature part of this research Ruben (2008) listed that change in specifications among the

major causes. Contrarily this was not the major causes in the desk study.

4.6.2 Impact of Variation Orders on Public Building Projects

According to the findings from the desk studies, completion schedule delay and increase in

project cost are the most common impacts of variation orders. It was not unexpected for the

project cost to increase due to frequent variations in the project. These impacts are also

repeated on the questionnaire responses as shown and ranked previously in Table 4.17.

As it was found from the interview, completion schedule delay, increase in project cost, and

disputes among parties were the most predominant impacts of variation orders.

From the responses of the questionnaire, completion schedule delay, increase in project cost,

additional payments for contractor, progress is affected and increase in overhead expense were the

most impacts of variation orders.

Completion schedule delay was the first major impact of variation orders in public building

projects. According to the findings from the desk studies and the interview, completion

schedule is the common impact on public building projects that increases the consistency of

the response to conclude. Previously (Ibbs, 1997a) pointed out that completion schedule

delay was a frequent result of variations in construction projects. This confirmed that

variations impact the project adversely, leading to delays in the project completion.

The second major impact of variation orders was increase in project cost on public building

projects which similarly confirms with the findings from the desk study and interview.

Completion schedule delay and increase in project cost are also the major impacts as



reviewed in the literature part. For example Koushki (2005) found that variation orders

impacted both the completion time and costs of projects. These impacts were due to

detrimental variation orders since they negatively impacted the client’s value. Any major

additions or alterations in the design may eventually increase the project cost. It was not

unexpected for the project cost to increase due to frequent variations in the project. This was

because the variation orders may impact the project's total direct and indirect costs.

Therefore, any major addition or alteration in the design may eventually increase the project

cost. The findings from the respondents were also consistent with the observations from the

desk study and interviews.

As the responses found from the questionnaire, additional payments for the contractor was

the third major impact of variation orders. Additional payment for the contractor is the

common impact when variation is ordered. As O’Brien (1998) described, variations are

considered to be a common source of additional works for the contractor. This is because as

the volume of work increases, payment to the contractor increases when the varied items are

measured. This adds value to the contractor.

The fourth major impact was the effect on the progress. This impact was not uncommon that

project progress can be affected due to variations. Since variation management passes

through different processes, most clients do not approve variation orders on time and the

contractor refuses to continue the work. The contractor can also need new materials, new

equipments and specialized man power. These affect the project progress.

The fifth major impact of variation orders on public building projects was the increase in

overhead expenses. This cost can be incurred directly or indirectly during the process and

implementation of variation orders. Because the overhead expenses for all involved parities

will increase as lots of professional and paper works need to be done. Arguably, the more the

variation orders, the more likely they increase the overhead expenses especially to the

contractor that impact public building projects.

4.6.3 Recommended Strategies to Minimize Variation Orders

According to the findings from the interview, the suggested recommendations by the

interviewee were to carry out detail site investigation before tendering, to produce a complete

design and contract documents, there should be communication between the parties, and



works should be supervised with a dedicated supervisor. These recommendations were also

mostly ranked on the questionnaires response. As the interviewee pointed out, preparing

complete detail drawings can reduce the risk of variation. Open communication among all

parties involved in the project is the key to reduce variations. Experienced and dedicated

supervisors can also reduce variation orders since they are not careless on the works they are

assigned.

According to the findings from the questionnaires ranked previously in Table 4.22 and the

interview conducted, the first most recommended strategy was consultants should produce a

concluding design and contract documents. The controls for the frequent change in design by

consultant, and inadequate working drawing details would be through systematic detailing of

design. This would provide an opportunity for the consultant to review and finalize the design

during the design phase.

Completing drawings at tender stage was the second most recommended strategy to minimize

variation orders. Any change or modification made later will result in an additional works

which leads to variations. The design team should submit complete design for tendering. This

would assist in reducing the occurrence of variations during the construction phase where the

impact of variations can be severe on the project.

The third most recommended strategy was works should be supervised with an experienced

and dedicated supervisor. This was because experienced supervisors can forecast what will

happen on site through their past experience. They are also decision makers comparing the

design and the actual site condition on the right time. Experienced supervisors are also

responsible for their job and this surely helps to minimize variation orders on site.

Enhancing communication between all involved parties was the fourth most recommended

strategy to minimize variation orders. Different parties involved in a project work differently,

so a clear communication between the parties is necessary. This was because communication

can increase project performance during the execution of a project.

The fifth most recommended strategy was to carry out detail site investigation including

detail soil investigation and considering it during tendering. This was because the design and

construction methodology varies from one site to the other. Even the same type of projects

cannot be executed with the same cost and schedule due to difference in site conditions.



CHAPTER FIVE

CONCLUSION AND RECOMMENDATIONS

5.1 Conclusion

5.1.1 Causes of variation orders on public building projects in Addis Ababa

The first objective of the study was to analyze the causes of variation orders on public

building projects in Addis Ababa. The desk study of the five projects confirmed that the most

frequent causes of variation orders on public building projects was design changes.

According to the interview made between three selected construction practitioners involved

in public building projects they pointed out that the main cause of variation orders was design

changes.

Among 38 causes of variation orders, the responses received from the clients’ showed that

impediment in prompt decision making process, change in design by the consultant, errors

and omissions in design, inadequate working drawing details, and unforeseen problems were

the top five most frequent causes of variation orders on public building projects.

According to the consultants’, the top five most frequent causes of variation orders on public

building projects were change in economic conditions, unforeseen problems, change of plans

or scope, change in specifications, and poor procurement process.

Regarding the contractors’, the top five most frequent causes of variation orders on public

building projects were lack of communication, inadequate working drawing details,

impediment in prompt decision making process, poor procurement process, and change in

design by the consultant.

From the overall responses, it was concluded that impediment in prompt decision making

process, change in design by the consultant, inadequate working drawing details, change in

specifications, and poor procurement process were the most important causes of variation

orders on public building projects. And there was a strong correlation between ranking by

client and consultant, client and contractor as well as consultant and contractor. This

confirmed that most of the respondents have the same perception about the causes of

variation orders on public building projects.



From the findings of the desk study, interview and questionnaire, change in design,

incomplete contract documents, impediment in prompt decision making process, inadequate

working drawing details, and change in specifications were the major causes of variations.

5.1.2 Impact of variation orders on public building projects in Addis Ababa

The second objective was to identify the various impacts of variation orders on public

building projects in Addis Ababa. The study found that variation orders had an impact on

public building projects. From the desk study of five projects, project A, project B, project C,

project D and project E were exposed to variation orders amounting to 15.95%, 6.78%,

8.20%, 19.60% and 8.87% of the contract amount respectively. According to the data from

the desk study, increase in project cost was the major impact on public building projects. The

interviewee indicated that variation orders adversely impacted costs.

As it was analyzed from the desk study, project A, project B, project C, project D and project

E experienced time overruns to 47.22%, 41.67%, 35.63%, 40.83% and 52.78% of the

contract schedule respectively. The interviewee also pointed out that variation order also

impacts the completion schedule of public building projects. It was argued that variation

orders contributed to time overruns.

From the 15 impacts of variation orders, completion schedule delay, increase in project cost,

additional payments for contractor, disputes among professionals, and effect on progress

were the top five most frequent impacts of variation orders according to the responses of the

clients’.

As consultants’ responded, the top five most frequent impacts of variation orders were

increase in project cost, delay in payment, completion schedule delay, effect on progress, and

increase in overhead expenses.

According to the responses of the contractors’, completion schedule delay, increase in project

cost, effect on progress, additional payments for contractor, and increase in overhead

expenses were the top five most frequent impacts of variation orders on public building

projects.

From the overall responses received, it was concluded that the top most impacts of variation

orders on public building projects were completion schedule delay, increase in project cost,



additional payments for contractor, effect on progress, and increase in overhead expenses.

The correlation between ranking by client and consultant, client and contractor as well as

consultant and contractor was strong. This indicated that most of the respondents have the

same perception about the impact of variation orders on public building projects.

From the findings of the desk study, interview and the questionnaires, the major impacts of

variation orders on public building projects were completion schedule delay, increase in

project cost, additional payments for the contractor, effect on progress, and increase in

overhead expenses.

5.1.3 Recommended strategies to minimize variation orders

The third objective was to suggest recommendations to minimize variation orders on public

building projects in Addis Ababa. From the literatures, fifteen (15) strategies to minimize

variation orders on building projects were identified. No recommended strategies were found

from the document study and conclusion was based on the questionnaire survey and the

interview to be able to suggest recommendations to minimize variation orders.

From the interview, it was repetitively suggested that designs and contract documents should

be complete at the tender stage to minimize the occurrence of variation orders on public

building projects.

The clients’ responded that drawings should be complete at tender stage to minimize

variation orders on building projects. Eventually, this may aid in eliminating the occurrence

of variations, arising from errors and design discrepancies, during the construction stage

where the impact of the variations can be severe.

The consultants’ and the contractors’ response argued on the strategy that states adequate

planning in advance is required by all involved parties before works start on site to minimize

variation orders. This was because a well planned project can eliminate variations that may

arise due to lack of pre-project planning.

From the interview and overall responses received, it was therefore concluded that the

following best five strategies were recommended to minimize variation orders on public

building projects:

The consultant should produce a concluding design and contract documents



Drawings should be complete at tender stage

Works should be supervised with an experienced and dedicated supervisor

Enhance communication between all parties

Carry out detail site investigation including detail soil investigations and consider it

during tendering stage

5.2 Recommendations

This research focused on the assessment of variation orders in a few contracts of public

building projects undertaken by city government of Addis Ababa. Based on the focused

sector and how variation is minimized, the recommendations of this thesis are as follows:

An understanding of the causes of variation orders would be helpful for building

professionals in assessing variation orders.

The client should allow sufficient time to prepare an elaborately detailed project brief.

This will eliminate frequent variations to the original plan of the project due to client

change of mind.

Variations can be minimized if consultants produce a complete design as change of

design was the major cause of variations in public building projects.

Direct communication among the project team is a key to eliminate variations occur

due to communication gap during design and execution phase.

Consultants should give sufficient time for planning and design phase, this will assist

in minimizing variation orders due design changes at construction stage.

A detailed design would be able to exert control to unnecessary interference from

consultants or other external influences.

The consultants should prepare completed contract document before the tendering

stage. This minimizes variation orders occur due to change of specifications.

Contractors should identify and inform the varied item of work to the client before the

activity starts to reduce variations. Because the client will have sufficient time to

check the varied item in different perspectives to give work order at minimum

variations.

There should be improvement in project management, and improved decision making

process on the part of the client during project execution stage so as to minimize the

occurrence of variation orders.



The study would assist professionals in taking proactive measures for minimizing

variation orders in building projects.

The results of this research should help construction practitioners, policy makers and

researchers in the field of construction management.

Further areas of research recommended are as follows;

Since this study focused on public building projects, it would be interesting to study

the impact of variation orders in other building projects and compare the results.

A more elaborative investigation into the contract conditions is needed with the view

to minimizing impact of variation orders in public building projects.



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A P P E N D I C E S

APPENDIX A: QUESTIONNAIRE

AAiT Addis Ababa University

Addis Ababa Institute of Technology School of Graduate Studies Department of Civil and Environmental Engineering

Q U E S T I O N N A I R E Assessing the Impact of Variation Orders on

Public Building Projects in Addis Ababa

Detail of the Researcher: Name: Andualem Endris Yadeta Course: Master of Science in Civil Engineering

(Construction Technology and Management) Mobile: +251-913 11 64 77 E-mail: [email protected]

Or AAiT, Civil and Environmental Engineering Department: Tell: +251-111 23 24 37 Fax: +251-111 23 94 80 E-mail: [email protected]

Supervisor: Associate Professor Wubishet Jekale Mengesha (Dr.-Ing) E-mail: [email protected]

This research study titled “Assessing the Impact of Variation Orders on Public Building Projects in Addis Ababa” is undertaken by Andualem Endris at the Addis Ababa Institute of Technology, Civil and Environmental Engineering Department to assess the impact of variation orders on public building projects. Please answer all questions.

Thanks in advance for your co-operation and help! Sincerely,

Andualem Endris

August 2013



SECTION A: ORGANIZATION AND RESPONDENT’S PROFILE

1. Which of the following best describes your company?

Company Tick one

Client

Consultant

Contractor

Other

2. If your answer above was other, please

specify:__________________________________

3. Your current position in your

organization:_____________________________________

4. Experience (please tick one):

Less than 5 years

5 to 10 years

10 years and above



SECTION B: CAUSES OF VARIATION ORDERS

Please indicate your level of agreement with the following questions on a scale 1 to 5.

Never Always

1 2 3 4 5

Indicator: 1 = Never

2 = Seldom

3 = Sometimes

4 = Often

5 = Always

2. The following are examples of causes of variation orders. Based on your experience,

indicate how frequently each of them occurs on public building projects.

S.N Causes of Variation Orders Never Always 1 2 3 4 5

1 Change of plans or scope 2 Change of schedule 3 Inadequate project objectives 4 Impediment in prompt decision making process 5 Change in specifications 6 Change in design by the consultant 7 Errors and omissions in design 8 Conflicts between contract documents 9 Technology change 10 Lack of coordination 11 Design complexity 12 Inadequate working drawing details 13 Consultant's lack of judgment and experience 14 Lack of consultant's knowledge of available materials



S.N Causes of Variation Orders (continued) Never Always 1 2 3 4 5

15 Honest wrong beliefs of consultant 16 Consultant's lack of required data 17 Design discrepancies 18 Non-compliant design with government regulations 19 Non-compliant design with owner's requirement 20 Lack of contractor's involvement in design 21 Unavailability of skills 22 Contractor's desired profitability 23 Differing site conditions 24 Defective workmanship 25 Unfamiliarity with local conditions 26 Lack of a specialized construction manager 27 Fast track construction 28 Poor procurement process 29 Lack of communication 30 Honest wrong beliefs of contractor 31 Lack of strategic planning 32 Contractor's lack of required data 33 Weather conditions 34 Health and safety considerations 35 Change in government regulations 36 Change in economic conditions 37 Socio-cultural factors 38 Unforeseen problems If any other causes of variation orders, please

specify Never Always 1 2 3 4 5

41 42 43 44 45 46 47 48 49 50



SECTION C: IMPACT OF VARIATION ORDERS


No impact Very high impact

1 2 3 4 5

Indicator: 1 = No impact

2 = Low impact

3 = Medium impact

4 = High impact

5 = Very high impact

3. Following are list of impact variation orders. From your experience, what is the impact of

variation orders on building projects?

S.N Impact of Variation Orders No Very high impact impact 1 2 3 4 5

1 Increase in project cost 2 Progress is affected 3 Increase in overhead expenses 4 Delay in payment 5 Quality degradation 6 Productivity degradation 7 Procurement delay 8 Rework and demolition 9 Logistics delays

10 Blemish firm’s reputation 11 Poor safety conditions 12 Poor professional relations 13 Additional payments for contractor 14 Disputes among professionals 15 Completion schedule delay



If any other impact of variation orders, please specify

No Very high impact impact 1 2 3 4 5

16 17 18 19 20 21 22 23 24 25



SECTION D: RECOMMENDATIONS TO MINIMIZE VARIATION ORDERS


Unimportant Very important

1 2 3 4 5

Indicator: 1 = Unimportant

2 = Less important

3 = Important

4 = Very important

5 = Very high important

4. Following are suggested strategies or recommendations used to minimize variation

orders. From your experience, what is the best strategy action can be taken to minimize

variation orders on building projects?

S.N Recommendations to minimize variation orders Un important Very High

important 1 2 3 4 5

1 All involved parties should plan adequately before works start on site

2 The consultant should produce a concluding design and contract documents

3 Complete the drawings at tender stage 4 Spend adequate time on pre-tender planning phase 5 Clients should provide a clear brief of the scope of works 6 All parties should forecast unforeseen situations 7 The consultant should co-ordinate closely at design stage 8 Enhance communication between all parties 9 Supervise the works with an experienced and dedicated

supervisor

10 Consultants should ensure that the design/specifications fall within the approved budget



S.N Recommendations to minimize variation orders (continued) Un important Very high

important 1 2 3 4 5

11 Get accurate information and research with regard to procurement procedure, material and plant

12 Carry out detail site investigation including detail soil investigations and consider it during tendering stage

13 Have the land application or land purchase completed before awarding contracts

14 Once the tender is awarded, make no changes to the specifications

15 Place experienced and knowledgeable executives in the engineering and design department

If you have any other recommendations to minimize variation orders, please specify

Un important Very high important

1 2 3 4 5 16 17 18 19 20 21 22 23 24 25

Thank You!



APPERNDIX B: List of Public Building Projects for the Study (Taken from Addis Ababa Housing Development and Construction Bureau (2012))

S.N Projects Building Height

Client Consultant Contractor Remarks

1 Addis Ababa City Administration Education bureau

G+12 AAHDCB MGM PLC AMB Con. PLC Selected for desk study

2 Addis Credit and Savings institution, HQ G+7 AAHDCB AAHDCB AMB Con. PLC Selected for desk study

3 Addis Ketema sub-city Administration office G+10 AAHDCB AAHDCB Orbit Con. PLC 4 Akaki-Kaliti TVET additional Block 1 G+4 AAHDCB AAHDCB Demera Con. PLC 5 Akaki-Kaliti TVET additional Block 2 G+4 AAHDCB AAHDCB “ 6 Akaki-Kalitti sub-city Administration office G+12 AAHDCB MGM PLC Yirgalem Con. 7 Arada Sub-city Fire and Emergency service G+7 AAHDCB AAHDCB GIGA Con. PLC Selected for

desk study 8 Bole sub-city Administration office G+10 AAHDCB AAHDCB Rama Con. PLC 9 Endode secondary school additional block G+4 AAHDCB AAHDCB T/Haimanot BC

10 Environmental Conservation Authority bureau G+7 AAHDCB AAHDCB Pyramid Con. PLC 11 Gandi hospital additional building G+4 AAHDCB AAHDCB Etete Con. PLC 12 Gandi Memorial hospital Maternity block G+4 AAHDCB AAHDCB Etete Con. PLC 13 Justice Bureau G+12 AAHDCB AAHDCB Tewodros A, BC 14 Kotebe teachers college additional block 1 G+4 AAHDCB AAHDCB Meven Con 15 Kotebe teachers college additional block 2 G+4 AAHDCB AAHDCB Radar Con. PLC 16 Kotebe teachers college additional block 3 G+4 AAHDCB AAHDCB “ 17 Kotebe teachers college additional block 4 G+4 AAHDCB AAHDCB “

18 Menelik Hospital additional building G+7 AAHDCB AAHDCB Afro-Tsion PLC 19 Police Commission head office G+7 AAHDCB AAHDCB GIGA Con. PLC Selected for

desk study 20 Ras Desta hospital Maternity block G+4 AAHDCB AAHDCB Melaku con. 21 Sport Commission G+12 AAHDCB AAHDCB GIGA Con. PLC Selected for

desk study 22 Tegbareid TVET College building G+7 AAHDCB AAHDCB Pyramid Con. PLC 23 Ye Abeboch Fire elem. school additional block G+4 AAHDCB AAHDCB T/Haimanot BC 24 Yeka sub-city Administration office G+12 AAHDCB MGM PLC Zamra Con. PLC 25 Yekatit 12 Hospital building G+7 AAHDCB AAHDCB GIGA Con. PLC 26 Yekatit 12 hospital Maternity block G+4 AAHDCB AAHDCB Tewodros B, BC 27 Youths and children theatre G+11 AAHDCB MGM PLC GIGA Con. PLC 28 Zewditu Memorial hospital additional building G+12 AAHDCB AAHDCB Safer Con. PLC



APPERNDIX C: Clients’ responses for causes of variation orders

Factor Description Frequency Analysis (FA)

Never Seldom Some times Often Always Change of plans or scope 1 2 5 1 0 Change of schedule 0 4 2 3 0 Inadequate project objectives 2 4 1 2 0 Impediment in prompt decision making process 0 3 1 4 1 Change in specifications 0 2 4 2 1 Change in design by the consultant 0 1 5 2 1 Errors and omissions in design 0 1 4 4 0 Conflicts between contract documents 0 2 3 4 0 Technology change 1 3 3 2 0 Lack of coordination 0 4 2 3 0 Design complexity 0 4 4 1 0 Inadequate working drawing details 0 1 4 4 0 Consultant's lack of judgment and experience 1 2 4 2 0 Lack of consultant's knowledge of available materials 0 3 4 2 0 Honest wrong beliefs of consultant 2 5 2 0 0 Consultant's lack of required data 0 4 4 1 0 Design discrepancies 0 1 5 3 0 Non-compliant design with government regulations 2 3 2 2 0 Non-compliant design with owner's requirement 0 1 7 1 0 Lack of contractor's involvement in design 1 2 4 1 1 Unavailability of skills 0 0 8 1 0 Contractor's desired profitability 0 2 4 3 0 Differing site conditions 1 2 6 0 0 Defective workmanship 2 2 3 2 0 Unfamiliarity with local conditions 1 4 2 2 0 Lack of a specialized construction manager 2 3 3 1 0 Fast track construction 2 4 3 0 0 Poor procurement process 2 0 4 3 0 Lack of communication 1 4 3 1 0 Honest wrong beliefs of contractor 1 3 3 2 0 Lack of strategic planning 1 2 2 4 0 Contractor's lack of required data 2 2 3 2 0 Weather conditions 1 6 2 0 0 Health and safety considerations 3 4 2 0 0 Change in government regulations 2 3 3 1 0 Change in economic conditions 1 5 3 0 0 Socio-cultural factors 3 3 3 0 0 Unforeseen problems 0 2 4 1 2



APPERNDIX D: Consultants’ responses for causes of variation orders


Never Seldom Sometimes Often Always Change in economic conditions 0 0 1 2 1 Unforeseen problems 0 0 2 0 2 Change of plans or scope 0 0 2 1 1 Change in specifications 0 1 0 2 1 Poor procurement process 0 0 1 3 0 Change of schedule 0 0 2 2 0 Design discrepancies 0 0 2 2 0 Lack of contractor's involvement in design 0 0 2 2 0 Lack of communication 0 0 2 2 0 Honest wrong beliefs of contractor 0 0 2 2 0 Lack of strategic planning 0 1 0 3 0 Change in design by the consultant 0 1 1 2 0 Errors and omissions in design 0 1 1 2 0 Contractor's desired profitability 0 1 1 2 0 Differing site conditions 0 1 1 2 0 Unfamiliarity with local conditions 0 1 1 2 0 Contractor's lack of required data 0 1 1 2 0 Impediment in prompt decision making process 0 1 2 1 0 Design complexity 0 2 0 2 0 Unavailability of skills 0 1 2 1 0 Lack of a specialized construction manager 0 1 2 1 0 Weather conditions 0 1 2 1 0 Health and safety considerations 0 1 2 1 0 Inadequate project objectives 0 2 1 1 0 Conflicts between contract documents 0 1 3 0 0 Inadequate working drawing details 0 2 1 1 0 Consultant's lack of judgment and experience 0 2 1 1 0 Non-compliant design with government regulations 0 2 1 1 0 Non-compliant design with owner's requirement 0 3 0 0 1 Defective workmanship 0 2 1 1 0 Fast track construction 0 2 1 1 0 Socio-cultural factors 0 1 3 0 0 Technology change 1 1 1 1 0 Lack of coordination 0 3 0 1 0 Consultant's lack of required data 0 2 2 0 0 Change in government regulations 0 2 2 0 0 Lack of consultant's knowledge of available materials 1 2 0 1 0 Honest wrong beliefs of consultant 1 2 1 0 0



APPERNDIX E: Contractors’ responses for causes of variation orders


Never Seldom Some times Often Always Lack of communication 0 2 6 8 3 Inadequate working drawing details 2 2 6 3 6 Impediment in prompt decision making process 0 3 9 3 4 Poor procurement process 0 3 6 9 1 Change in design by the consultant 0 3 9 4 3 Change of plans or scope 0 4 6 8 1 Lack of contractor's involvement in design 1 4 6 4 4 Contractor's desired profitability 1 4 5 6 3 Change in specifications 0 5 4 10 0 Errors and omissions in design 0 5 6 6 2 Contractor's lack of required data 1 3 6 8 1 Change of schedule 1 2 8 8 0 Consultant's lack of judgment and experience 3 1 7 5 3 Lack of consultant's knowledge of available materials 2 3 5 7 2 Consultant's lack of required data 0 3 9 7 0 Design discrepancies 1 3 7 7 1 Lack of a specialized construction manager 1 2 9 6 1 Lack of strategic planning 0 6 6 5 2 Unforeseen problems 1 3 10 3 2 Lack of coordination 2 4 7 3 3 Differing site conditions 1 4 8 6 0 Defective workmanship 1 6 6 4 2 Unfamiliarity with local conditions 0 5 10 3 1 Conflicts between contract documents 2 3 10 2 2 Change in economic conditions 3 5 4 5 2 Design complexity 3 4 6 5 1 Non-compliant design with owner's requirement 2 3 12 0 2 Honest wrong beliefs of contractor 3 5 5 6 0 Unavailability of skills 2 3 13 1 0 Weather conditions 2 6 9 1 1 Technology change 1 10 5 2 1 Honest wrong beliefs of consultant 4 4 8 2 1 Non-compliant design with government regulations 2 5 11 1 0 Inadequate project objectives 4 5 7 3 0 Socio-cultural factors 1 12 4 1 1 Fast track construction 3 7 8 1 0 Change in government regulations 6 7 3 2 1 Health and safety considerations 8 4 5 2 0



APPERNDIX F: Clients’ responses for impacts of variation orders


No Low Medium High Very High Completion schedule delay 0 1 0 5 3 Increase in project cost 0 1 2 3 3 Additional payments for contractor 1 0 2 4 2 Disputes among professionals 1 1 3 2 2 Progress is affected 0 2 5 0 2 Delay in payment 1 3 1 2 2 Logistics delays 0 2 4 3 0 Increase in overhead expenses 0 2 5 2 0 Procurement delay 0 2 6 1 0 Rework and demolition 2 2 2 2 1 Poor professional relations 1 3 4 1 0 Quality degradation 1 4 3 1 0 Poor safety conditions 1 5 3 0 0 Productivity degradation 2 4 3 0 0 Blemish firm’s reputation 1 6 2 0 0



APPERNDIX G: Consultants’ responses for impacts of variation orders


No Low Medium High Very High Increase in project cost 0 0 1 1 2 Delay in payment 0 0 0 3 1 Completion schedule delay 0 0 1 1 2 Progress is affected 0 0 1 2 1 Increase in overhead expenses 0 0 1 3 0 Rework and demolition 0 0 1 3 0 Logistics delays 0 0 1 3 0 Procurement delay 0 0 2 2 0 Additional payments for contractor 0 1 1 1 1 Quality degradation 0 1 1 2 0 Productivity degradation 0 1 2 0 1 Blemish firm’s reputation 0 1 1 2 0 Poor professional relations 0 1 1 2 0 Poor safety conditions 0 1 2 1 0 Disputes among professionals 0 1 2 1 0



APPERNDIX H: Contractors’ responses for impacts of variation orders


No Low Medium High Very HighCompletion schedule delay 1 0 5 5 8 Increase in project cost 0 1 5 7 6 Progress is affected 1 1 2 11 4 Additional payments for contractor 0 2 7 5 5 Increase in overhead expenses 1 3 4 6 5 Delay in payment 1 5 2 5 6 Procurement delay 1 2 5 8 3 Productivity degradation 1 2 8 5 3 Logistics delays 1 2 7 9 0 Disputes among professionals 1 4 5 7 2 Rework and demolition 1 4 6 6 2 Blemish firm’s reputation 1 4 8 5 1 Quality degradation 3 3 6 5 2 Poor safety conditions 3 5 4 5 2 Poor professional relations 3 4 6 4 2



APPERNDIX I: Clients’ responses for strategies to minimize variation orders

Factor Description

Frequency Analysis (FA)

Un

impo

rtan

t

Les

s Im

port

ant

Impo

rtan

t

Ver

y im

port

ant

Ver

y h

igh

impo

rtan

t

Complete the drawings at tender stage 0 0 0 3 6

Carry out detail site investigation including detail soil investigations and consider it during tendering stage 0 0 1 4 4

All involved parties should plan adequately before works start on site 0 0 1 5 3 The consultant should produce a concluding design and contract documents 0 0 3 2 4 Spend adequate time on pre-tender planning phase 0 1 1 3 4 The consultant should co-ordinate closely at design stage 0 0 2 4 3 Supervise the works with an experienced and dedicated supervisor 0 0 1 6 2

Place experienced and knowledgeable executives in the engineering and design department 0 0 1 6 2 Consultants should ensure that the design/specifications fall within the approved budget 0 1 0 6 2 Clients should provide a clear brief of the scope of works 0 1 3 2 3 All parties should forecast unforeseen situations 0 0 3 5 1 Enhance communication between all parties 0 0 4 3 2 Get accurate information and research with regard to procurement procedure, material and plant 0 0 6 0 3 Once the tender is awarded, make no changes to the specifications 0 1 4 4 0 Have the land application or land purchase completed before awarding contracts 0 3 3 0 3



APPERNDIX J: Consultants’ responses for strategies to minimize variation orders

Factor Description


Un

impo

rtan

t

Les

s Im

port

ant

Impo

rtan

t

Ver

y im

port

ant

Ver

y h

igh

impo

rtan

t

All involved parties should plan adequately before works start on site 0 0 0 0 4 Enhance communication between all parties 0 0 0 1 3 Supervise the works with an experienced and dedicated supervisor 0 0 0 1 3 Carry out detail site investigation including detail soil investigations and consider it during tendering stage 0 0 0 1 3 The consultant should produce a concluding design and contract documents 0 0 0 2 2 Complete the drawings at tender stage 0 0 0 2 2 Spend adequate time on pre-tender planning phase 0 0 1 0 3 The consultant co-ordinate closely at design stage 0 0 0 2 2 Consultants should ensure that the design/specifications fall within the approved budget 0 0 1 0 3 Place experienced and knowledgeable executives in the engineering and design department 0 0 0 2 2 Clients should provide a clear brief of the scope of works 0 0 1 1 2 Get accurate information and research with regard to procurement procedure, material and plant 0 0 0 3 1 Have the land application or land purchase completed before awarding contracts 0 0 1 2 1

All parties should forecast unforeseen situations 0 0 2 1 1 Once the tender is awarded, make no changes to the specifications 0 0 3 1 0



APPERNDIX K: Contractors’ responses for strategies to minimize variation orders

Factor Description


Un

impo

rtan

t

Les

s Im

port

ant

Impo

rtan

t

Ver

y im

port

ant

Ver

y h

igh

impo

rtan

t

All involved parties should plan adequately before works start on site 0 1 2 2 14 The consultant should produce a concluding design and contract documents 0 1 3 4 11 Enhance communication between all parties 0 2 1 7 9

The consultant should co-ordinate closely at design stage 1 0 1 10 7 Supervise the works with an experienced and dedicated supervisor 2 1 1 4 11 Consultants should ensure that the design/specifications fall within the approved budget 0 1 4 6 8 Place experienced and knowledgeable executives in the engineering and design department 1 1 1 8 8 All parties should forecast unforeseen situations 0 1 3 9 6 Get accurate information and research with regard to procurement procedure, material and plant 0 1 5 5 8 Complete the drawings at tender stage 0 2 5 4 8 Clients should provide a clear brief of the scope of works 1 0 6 4 8 Spend adequate time on pre-tender planning phase 1 1 5 4 8 Carry out detail site investigation including detail soil investigations and consider it during tendering stage 1 2 3 5 8 Have the land application or land purchase completed before awarding contracts 1 2 6 2 8 Once the tender is awarded, make no changes to the specifications 3 5 3 3 5



APPERNDIX L: Thesis Proposal

ASSESSING THE IMPACT OF VARIATION ORDERS

ON PUBLIC BUILDING PROJECTS IN ADDIS ABABA

by

Andualem Endris Yadeta

Thesis Proposal submitted to Addis Ababa University, Addis Ababa Institute

of Technology in partial fulfillment of the requirements for the degree

Of

Master of Science

In

Civil Engineering

(Construction Technology & Management)

Under the Supervision of Dr.-Ing Wubishet Jekale

JANUARY 2012



A B S T R A C T

Many building projects are exposed to variations. This study will investigate the impact of

variation orders on public building projects in Addis Ababa in order to take proactive

measure to minimize or appropriately manage it. The study will have the following

objectives, namely (1) to determine the causes of variation orders; (2) to determine the

impacts of variation orders; and (3) to recommend strategies to minimize variation orders.

Literatures relative to the research area will be extensively reviewed. The data gathering

approaches will include desk study, interviews and questionnaire to collect both qualitative

and quantitative data. Statistical data analysis and interpretations will be used and finally the

result will be concluded and recommended to all stakeholders.



Background of the Study

Construction contract is a business agreement that is subjected to variability. Contractual

clauses relating to changes allow parties involved in the contract to freely initiate variation

orders within the ambit of the scope of the work without alteration the original contract

(Adnan et al., 2010) sited in Harbans (2003). Even if carefully planned, it is likely that there

will be changes to the scope of the contract as the work progresses (Adnan et al., 2010).

Variations and conflicts in a construction projects, at work, and even in our daily lives are

very common. Any addition, deletion, or any other revision to project goals and scope of

work are considered to be variation, whether they increase or decrease the project cost or

schedule (Adnan, 2010). A change in construction projects refers to an alteration to design,

building works, project programs or project aspects caused by modifications of preexisting

conditions, assumptions, or requirements (Adnan, 2010).

Various studies have revealed that variation orders contribute to cost overruns. A study of the

effects of variation orders on institutional building projects revealed that variation orders

contributed substantially to increase in construction project costs (Ruben and Theo, 2008). It

was found that variation orders issued during various phases of construction projects

negatively affected both the completion time and costs of projects (Ruben and Theo, 2008).

In developing countries like Ethiopia, its potential impact leads to unnecessarily increase the

cost of construction without adding value to the project. The construction sector in Ethiopia is

considered one of the crucial economical sectors. This sector is subjected to a very difficult

situation since the increase of the sector. There are many public building projects in Addis

Ababa and they have been constructing now. Many of the projects are either on hold or

subjected to major variations due to shortage of construction materials, increase in

construction materials cost, shortage of modern construction equipment, lack of skilled

manpower. So this thesis aims to assess the impact of variation orders on Addis Ababa public

building projects.



Statement of the Problem

Nowadays, variation orders have become a common problem in public building projects in

Addis Ababa. Variation orders are issued to correct or modify the original scope of work

because changes during construction of projects are unavoidable. The major causes of delay,

disputes and sometimes generate significant cost and environmental impacts are variation

orders issued during construction of projects. Yet, no unique method is available for

minimizing variation orders effectively. However, their impact can be minimized with an

appropriate study about the causes. Variation orders on public building projects have the

potential to impact public building projects, and the identification of their causes might lead

to their reduction, possible elimination and subsequent improvement in overall performance

of public building projects.

Review of Literatures

Construction project is a mission, undertaken to create a unique facility, product or service

within the specified scope, quality, time and cost. In practice, however, some construction

projects encounter variation, delay on completion time or poor workmanship upon

completion.

The one thing certain on any project is that there will be variations occurring along the way

sometimes even before the signing of the contract. Variations are inevitable in any

construction projects (Ibbs et al., 2001). Nothing is more constant than variation during the

course of a construction project. Despite the best efforts of all concerned during the planning,

implementation and administration of the contract, variation will almost certainly occur. The

variations and variation orders can be deleterious in any project, if not considered collectively

by all participants (Arain and Low, 2005). The most frequent type of variation met in

building projects are variations to the original scope of work or those that arise from

unexpected conditions in the field. Even two buildings of same design, that is very similar,

have differences caused by the terrain, existing utilities, or other factors such as subsurface

conditions. Basically variation orders are acceptable as part of the contract administration

process.

Further, the human behavior of parties to the contract cannot be predicted. Variation orders

may arise from changes in the minds of parties involved in the contract. Variation orders may



be initiated either by clients or by contractors (Adnan, et al., 2010). A study that focused on

the points of view of developers of potential causes of variation orders suggested four main

root agents of variation orders (Arain and Pheng, 2006). These agents included clients,

consultants, contractors and unspecified “others”.

If variation orders are frequent, they may potentially affect the quality of works. Hanna et al.

(2002) indicated that contracts with a significant degree of risk for unknown variables such

for example lump sum, contractors may cut corners on quality and quantity to maximize

profits. Quality of works may be compromised as contractor may try to compensate for the

losses as they are not optimistic at about cost recovery. Moreover; variation order occurrence

can lead to revision of health and safety considerations.

Ruben and Theo (2008) remarked that disputes between the client and the contractor can

occur if variation orders are not managed carefully. Harbans (2003) warned that unless a

mutually acceptable solution is agreed by the parties, valuation of variations in the form of

variation orders will continue to remain at the forefront of disputes and claims making their

way ultimately to arbitral tribunals or the corridors of justice. Ssegawa et al. (2002) found

that a large proportion of current arbitrations were on claims for additional time and

additional expenses. He reported that more than one-third of disputes pertained to how to

determine losses that stem from variation orders.

Research Objectives

The objectives of the study will be:

To determine the causes of variation orders;

To identify the impacts of variation orders; and

To recommend strategies to minimize variation orders.

Research Questions

From the objectives of the study, formulating and answering the following research questions

will define the overall purpose:

What are the causes of variation orders?

What are the impacts of variation orders?



How can we minimize variation orders?

Research Methodology

The research methodology is structured as follows:

Literature and previous studies related to the area of research will be extensively

reviewed.

The research design is based on a purposive sampling selection process in terms of which

a representative sample of stakeholders/participants in the construction process of public

building will be surveyed and a selection of similar public building projects from which

to derive further data on variation orders. In particular, case studies, interviews with

relevant parties such as site and head office management of public institutions, self-

administered surveys and examination of public project documentation and records will

form the basis of the research methodology.

The gathered data will be analyzed using the appropriate statistical analysis tools. Both

quantitative and qualitative methods will be used.

Then conclusions will be drawn from the analyzed data and recommendations for improvement

and future study will be formulated.



Work Schedule

No

Task

Duration (in weeks): February- July

Feb 2012 Mar 2012 April 2012 May 2012 June 2012 July 2012

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

1 Literature review

2 Questionnaire

preparation

3 Data collection

4 data analysis

5 Report preparation

6 Report compilation



Budget

S.N Item Unit Qty Rate Amount(ETB)

1 Stationeries

1.1 Photo copy Pcs 800 0.4 320

1.2 Flash Disk(2GB) Pcs 1 200 200

1.3 Blank CDs and DVD Pcs 20 5 100

1.4 Typing and Printing Pcs 300 3 900

Sub-total (1)

1520

2 Transportation and Daily expense

2.1 Transportation - 1000

2.2 Daily expense Days 30 50 1500

Sub-total (2)

2500

3 Others - 1000

Sub-total(3)

1000

Total (1+2+3) 5020

4 Contingency (10%) 780

5 Grand Total 5800(ETB)



Submitted by

Andualem Endris Yadeta ………………..… ……………………

Student Signature Date

Approved by

1. Wubishet Jekale (Dr.Ing) …………………. …………………..

Advisor Signature Date

2. _______________________ ………………… ..…………………

Chair man, Dep.’s Signature Date

Graduate Committee

3. _______________________ …………………. ……………………

Chair man, Faculty’s Signature Date

Graduate Committee

4.________________________ …………………… ……………………

Dean, Graduate School Signature Date

Assessing the Impact of Variation Orders on Public Building Projects in Addis Ababa-By Andualem

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